:  ';=^i^'^S^^SS  ^-'27^\S#  ,    ,  ^^^^^Sm^-^^/ 


■ 


^  Miiia&i,     ?irt»*ii"^fe#- 


Metropolitan  System  of  Bookkeeping 


Metropolitan  System  of  Bookkeeping, 

embracing 

Theory  and  Practice  of  Bookkeeping  and  Accounting  for 

High  Schools,  Parochial  Schools,  Academies  and 

all  other  schools  teaching  the  subject 


By 

W.  A.  SHEAFFER,  Ph.  B. 

Head  of  Commercial  Department  "West  Division  Hifck  School,  Milwaukee,  Wi*. 
Instructor   of  Accounting  Marquette  University 


Complete 


METROPOLITAN    SERIES 


Metropolitan  Text  Book  Company 

CHICAGO,  ILLINOIS 
1916 


•  ' 


51 1  '7 


(?Af 


Copyright,  1914 
Copyright,  1916 

BY 

Metropolitan  Text  Book  Company 


PREFACE 

In  preparing  this  text  on  bookkeeping,  the  author  has  had  the 
gradual,   progressive   development   of   the  subject   in   mind. 

A  reaction  is  taking  place  in  the  teaching  of  bookkeeping  in  the  best 
schools.  There  is  no  good  reason  why  the  teaching  of  bookkeeping, 
especially  in  the  beginning  course,  should  differ  so  much  from  the 
teaching  of  other  subjects.  In  other  subjects,  we  do  not  attempt  to 
teach  the  pupil  at  once  all  the  operations  necessary  to  give  him  a  com- 
plete understanding  of  the  subject.  We  teach  him  an  operation  or  step 
at  a  time. 

The  author  believes  that  teachers  and  pupils  alike  will  welcome 
a  text  in  bookkeeping  that  takes  up  one  operation  at  a  time,  or  a  new 
subject,  and  explains  it  before  undertaking  another.  Each  subject  is 
well  illustrated  and  sufficient  exercises  are  given  to  enable  the  pupil 
to  learn  one  step  before  studying  the  next.  The  development  and  il- 
lustration of  a  new  subject  in  practically  every  chapter  is  a  feature 
that  should  appeal  to  every  teacher  of  the  subject. 

The  expression,  "learn  by  doing,"  has  come  to  mean  little  more 
than  routine,  mechanical  work  without  much  thought.  Skill  in  the 
mechanical  work  must  be  developed  by  a  sufficient  number  of  exercises 
and  sets,  but  that  is  simply  one  side  of  the  study  of  bookkeeping. 

The  author  believes  that  if  bookkeeping  is  to  maintain  its  place  as 
a  study  in  the  secondary  school  curriculum  on  a  par  with  other  subjects, 
the  thought  side  must  be  emphasized.  It  must  not  be  simply  an  in- 
cidental matter.  Bookkeeping,  as  a  study,  should  not  depend  on  its 
practical  value  alone  for  its  standing.  To  develop  the  thought  side  of 
bookkeeping,  frequent  class  recitations  are  necessary.  The  arrange- 
ment  of   the   text  is   especially   adapted   for   this   purpose. 

In  beginning  with  the  study  of  cash,  the  author  believes  he  is  be- 
ginning with  a  subject  in  which  the  pupil  is  naturally  interested.  The 
average  pupil  studying  bookkeeping  knows  little  about  business,  but 
he  does  know  the  difference  between  cash  received  and  cash  paid  out. 

v. 


364750 


vi.  PREFACE 

Whatever  difficulty  the  average  pupil  has  had  in  the  use  of  the  cash 
book  has  been  because  he  has  been  taught  entries  that  he  must  un- 
learn  when   he   begins   the   use   of   the  cash   book. 

The  author  makes  no  apology  for  minimizing  the  journal  as  a  book 
of  entry.  To  spend  weeks  and  months  learning  how  to  make  entries 
in  the  journal  that  are  rarely  entered  in  it  in  modern  systems  of  ac- 
counts, is  wasted  time.  Sufficient  exercises  and  transactions  are  given 
in  the  use  of  the  journal  to  give  an  understanding  of  the  principle3  of 
debit   and    credit. 

In  developing'  the  subject,  the  author  has  constantly  kept  in  mind 
the  principles  of  accounting.  But  in  doing  this  he  has  also  recognized 
the  fact  that,  while  the  principles  of  bookkeeping  must  conform  with 
those  of  accounting,  they  must  be  gradually  unfolded.  To  plunge  the 
pupil  into  the  details  of  the  most  advanced  accounting  methods  and 
practice  in  his  beginning  work,  is  to  give  him  something  entirely  beyond 
his  mental  grasp. 

The  author  has  also  recognized  the  fact  that  the  very  best  account- 
ants differ  in  practice  in  reference  to  certain  subjects  and  in  the  use  of 
certain  forms.  The  author  has  taken  advantage  of  this  fact  in  the  ad- 
vanced work  by  illustrating  different  methods  of  treating  some  of  these 
points.  No  catch  problems  nor  transactions  have  been  given.  If  a 
subject  is  too  difficult  to  be  explained  according  to  the  principles  of 
accounting,  it  is  omitted  until  the  pupil  can  grasp  it,  rather  than  to 
present   it   in   an   incorrect   way. 

In  the  preparation  of  the  text  and  of  the  business  papers,  business 
men,  accountants,  and  teachers  have  rendered  valuable  assistance.  To 
all   of   these,    the   author   is   greatly   indebted. 

The  Author. 


TABLE  OF  CONTENTS 


Chapter 

I. 

II. 

III. 

IV. 

V. 

VI. 

VII. 

VIII. 

IX. 

X. 

XI. 

XII. 

XIII. 

XIV. 

XV. 


XVI. 

XVII. 

XVIII. 

XIX. 

XX. 

XXI. 

XXII. 

XXIII. 

XXIV. 


XXV. 

XXVI. 

XXVII. 

XXVIII. 

XXIX. 

XXX. 

XXXI. 

XXXII. 


PART  I 

Page 

Introduction 1 

The  Cash  Book 3 

The  Merchandise  and  Expense  Accounts 11 

Accounts  with  Persons  .'. 18 

Principles  of  Double  Entry.    Set  1 23 

The  Trial  Balance.    Set  II 37 

Accounts  Classified 43 

Statements 48    / 

Closing  the  Ledger.    Set  III 52  ^ 

Notes  Receivable  and  Notes  Payable 65 

Interest  and  Discount  on  Notes 72 

The  Sales  Book  and  the  Purchase  Book 78 

Set  IV.  April  and  May 84 

Discount  on  Purchases  and  on  Sales 90 

The  Bank  Account 94 

Set  V.  June  and  July 102 

PART  II 

Trading  Accounts 120 

Bank  and  Sight  Drafts 128 

Set  VI.    Aug.  1-15 135 

How  to  Ship  Goods 153 

Set  VI.    Aug.  17-31 161 

Time  Drafts 178 

Set  VI.    September  1-15 184 

Shipments  and  Consignments 190 

Set  VI.    September  16-30 196 

PART  III 

Introduction 209 

Controlling  Accounts  and  Columnar  Books 211 

Methods  of  Recording  Sales  and  Various  Ledger  Forms 220 

Set  VII.    Wholesale  Hardware,  October  15-31 227 

Adjustment  Entries 243 

Set  VII.    Wholesale  Hardware,  November  1-7 256  J 

Closing  by  Journal  Entry 264  ^ 

Books  and  Accounts  of  a  Commission  Business 270 

Set  VIII.    Commission  Business,  December 278 

vii. 


Vlll. 


TABLE  OP  CONTENTS 


PART  IV 
Chapter  Page 

XXXIII.  Corporations 294 

XXXIV.  Corporation  Entries  and  Accounts 304 

XXXV.    Manufacturing  Costs 314 

XXXVI.     The  Voucher  System  of  Accounts 320 

XXXVII.     Set  IX.     Manufacturing,  January 329 

XXXVIII.     Depreciation 345 

XXXIX.    Manufacturing,  Selling,  and  Profit  and  Loss  Statements  ....  350 

XL.     Set  IX.     Manufacturing,  February 359 

XLI.     Distribution  of  Profits 373 

XLII.    Bonds  and  Funds 377 

Appendix i,  xvi 

Index xvii 


LIST  OF  EXERCISES 

Exercise   1.  Personal  Cash  Book 5 

2.  Cash  Book  of  Athletic  Association 7 

3.  Cash  Book  of  Retail  Store 10 

4.  Cash  Book  of  Retail  Store,  with  Accounts  Named 15 

5.  Creditors'  Ledger  Accounts 19 

6.  Customers'  Ledger  Accounts 20 

7.  Creditors'  and  Customers'  Ledger  Accounts 21 

8.  Analysis  of  Trial  Balance,  Set  1 46 

9.  Analysis  of  Trial  Balance,  Set  II 46 

10.  To  Find  the  Profit  or  Loss  on  Merchandise 46 

11.  Review  Exercise  in  Journalizing,  Posting  and  Taking  a  Trial 

Balance 46 

12.  Six-column  Statement 49 

13.  Closing  the  Ledger 58 

14.  Six-column  Statement 63 

15.  Statements  of  Profit  and  Loss  and  of  Assets  and  Liabilities  .. .  63 

16.  Exercise  in  Journalizing  Notes  Receivable 68 

17.  Exercise  in  Journalizing  Notes  Payable " 70 

18.  Exercise  in  Journalizing  Notes  Receivable  and  Notes  Payable  70 

19.  Exercise  in  Paying  Notes  Receivable  and  Notes  Payable 71 

20.  Exercise  in  Paying  Notes  Receivable  and  Notes  Payable 74 

21.  Find  the  Discount  and  Proceeds 76 

22.  Exercise  in  Paying  Notes  and  Discounting  Them 76 

23.  Purchase  Book  and  Sales  Book  of  Set  III 82 

24.  Closing  the  Ledger •  ■ 82 

25.  Entries  for  Merchandise  Discount 91 

26.  Entries  for  Interest,  Discount,  and  Merchandise  Discount  ...  92 

27.  Exercise  in  Writing  Checks 100 

28.  Exercise  in  Writing  Invoices  and  Notes s 100 

29.  Statements  of  Profit  and  Loss  and  of  Assets  and  Liabilities  ...  115 


LIST  OF  EXERCISES  fe. 

Exercise  30.  Statements  of  Profit  and  Loss  and  of  Assets  and  Liabilities  116 

31.  Entries  for  Opening  Books 126 

32.  Entries  for  Opening  Books 126 

33.  Bank  and  Sight  Drafts 134 

34.  Journalizing  Trading  Entries 160 

35.  Closing  Trading  Accounts 160 

36.  Per  Cent  of  Profit  or  Loss 174 

37.  Entries  for  Opening  Books 174 

38.  Journalizing  Trading  Accounts 175 

39.  Closing  Trading  Accounts 175 

40.  Trading,  Profit  and  Loss  and  Asset  and  Liability  Statements  .  176 

41.  Time  Drafts 183 

42.  Shipments  and  Consignments 194 

43.  Entries  for  Drafts 201 

44.  Trading  Accounts 202 

45.  Real  Estate  and  Its  Nominal  Account 203 

46.  Delivery  Equipment  and  Its  Nominal  Account 204 

47.  Shipments  and  Consignments 204 

48.  Insurance  Account 205 

49.  Opening  Entries 205 

50.  Statements 205 

51.  Entries  in  a  Columnar  Cash  Book 218 

52.  Entries  in  a  Columnar  Journal 218 

53.  Entries  for  Cash  Shortage 250 

54.  Entries  for  Cash  Over 250 

55.  Entries  for  the  Receipt  of  Cash  From  a  Bankrupt  Customer  . .  250 

56.  Entry  for  a  Dishonored  Draft 250 

57.  Entries  to  Correct  Mistakes  in  Closing  the  Books 250 

58.  Entries  for  a  Fire  Loss \  .  250 

59-60.  The  Adjustment  of  Interest  on  Partners'  Accounts 250 

61.  Trading  and  Profit  and  Loss  Statements  and  Statements  of 

Assets  and  Liabilities 254 

62.  Problems  in  Finding  the  Per  Cent  of  Profit  and  the  Per 

Cent  of  the  Cost  of  Doing  Business  on  the  Sales 263 

63.  Journal  Entries  to  Close  the  Books  of  Set  VII,  October 268 

64.  Journal  Entries  to  Close  the  Books  of  Set  VII,  November  .  .  268 

65.  Entries  for  Consignments  to  be  Sold  on  Commission 277 

66.  Posting  Exercise  65  to  the  Consignment  Ledger 277 

67.  Entries  for  Consignments  to  be  Sold  on  Commission 290 

68.  Posting  Exercise  67  to  the  Consignment  Ledger 291 

69.  Entries  for  the  Receipt  of  Cash  From  a  Bankrupt  Customer  . .  291 

70.  Entries  for  the  Purchase  and  Sale  of  Shares  of  Stock 291 

71.  The  Division  of  a  Mixed  Merchandise  Account 291 

72.  Adjustment  of  Interest  on  Partners'  Accounts 291 


X. 


LIST  OF  EXERCISES 


Exercise  73. 

74-77. 
78-80. 

81. 
82-87. 

88. 

89. 
90-93. 
94-96. 

97. 

A-B. 
C. 


Exercise  in  the  Use  of  the  Stockholders'  Ledger 303 

Opening  Entries  for  a  Corporation 311 

Entries  to  Close  the   Books  of  a   Partnership  and  Open  the 

Books  of  a  Corporation 311 

Entries  for  the  Purchase  of  a  Corporation  by  a  Corporation  . . .  313 

Exercises  in  Computing  and  Entering  Depreciation 348 

Manufacturing,  Selling,  and  Profit  and  Loss  Statements 371 

Journal  Entries  to  Close  the  Ledger 372. 

Entries  to  Distribute  Profits 376 

Entries  for  Bonds 380 

Exercise  in  Making  a  Trial  Balance  from  a  List  of  Accounts 

That  Are  Out  of  Balance 880 

Statement  for  Single  Entry  and   Entries  to  Change  From 

Single  to  Double  Entry , App.    xv 

Review  Exercise App.  xvi 


PARTI 


INTRODUCTION 

Every  business  man  should  keep  some  record  of  his  transactions. 
Even  if  the  transactions  are  few  in  number,  it  is  not  safe  to  trust  to 
memory. 

These  records  may  have  to  be  examined  by  others.  They  may 
have  to  be  taken  into  court  in  case  of  a  dispute  between  the  parties. 
For  these  reasons,  the  records  must  be  kept  in  such  a  way  that  they  will 
be  understood  by  others. 

Bookkeepers  and  accountants  have  adopted  certain  forms  of  records 
and  have  made  the  use  of  certain  books  so  general  that  they  must  be 
studied  by  every  one  that  wishes  to  become  familiar  with  bookkeeping 
methods  and  business  practice.  Other  forms,  record  books,  and  busi- 
ness methods  differ  in  different  lines  of  business.  These  may  be  studied 
in  the  more  advanced  work  or  in  actual  business.  The  fundamental 
principles  of  bookkeeping  and  accounting  are  the  same  no  matter  how 
complicated  the  books  and  records  may  be. 

Bookkeeping  is  the  art  of  making  a  systematic  record  of  business 
transactions  and  of  properly  classifying  these  records  so  as  to  show  the 
true  condition  of  the  business. 

The  pupil  will  find  that  in  order  to  be  successful  in  his  work  in 
bookkeeping  he  must  be  a  student  of  business  methods.  He  must 
learn  many  things  about  business  practice  in  addition  to  the  making  of 
the  proper  records.     A  systematic  record  of  a  transaction  is  an  entry. 

Double  entry  bookkeeping  is  the  system  most  commonly  used  in 
business.  Double  entry  keeps  records  with  persons,  with  property, 
and  with  all  items  of   income  and  expense. 

In  the  pupil's  study  of  double  entry  bookkeeping,  he  must  give 
careful  attention  to  certain  features  of  the  bookkeeping  work.  He 
must  learn  to  master  details.  Bookkeeping  records  must  be  in  accord- 
ance with  the  forms  in  general  use.  Many  things  must  be  done  in  a 
particular  way   even   to   the  smallest   details. 

The    pupil    must    be    accurate.     Mathematical    accuracy    is    of    the 


2  INTRODUCTION 

greatest  importance.  But  accuracy  in  bookkeeping  includes  much  more 
than  that.  It  includes  the  ability  to  see  a  record  or  form  exactly  as  it 
is  illustrated  and  to  correctly  use  it  in  his  practice  work.  It  includes 
the  ability  to  follow  instructions  exactly.  The  formation  of  these 
habits  will  be  of  immense  value  to  every  one  whether  he  contemplates 
a    business    career    or    not. 

The  work  must  be  carefully  and  neatly  done.  The  penmanship 
must  be  the  best  the  pupil  is  capable  of  doing.  To  cultivate  habits 
of  neatness  and  carefulness,  every  page  of  the  written  work  should  be 
free  from  blots,  erasures,  marked-over  words  or  figures,  and  anything 
else  that  would  mar  the  appearance  of  the  work. 

These  mechanical  features  of  the  bookkeeping  work  must  be  learned 
and  learned  thoroughly.  They  must  become  almost  automatic.  Fre- 
quent exercises  and  reviews  will  give  the  pupil  skill  in  entering  the 
transactions,  according  to  the  proper  form,  accurately  and  neatly. 

But  that  is  only  one  side  of  the  pupil's  study  of  bookkeeping.  He 
must  learn  to  think.  He  must  learn  to  classify  and  to  analyze.  He 
must  be  more  than  an  imitator  of  forms.  He  must  not  only  know 
how  to  do  a  thing  but  also  why  it  is  done. 

The  work  is  elastic  in  character.  In  part  of  the  work  the  business 
papers  may  be  used  or  not.  -Some  of  the  transactions  called  exercises 
may  be  omitted  at  the  discretion  of  the  teacher.  The  sets  represent 
a   progressive   development   of   the   subject.     None   should    be   omitted. 

The  exercises  should  be  worked  out  on  loose  sheets  of  paper.  The 
beginning  sets  should  be  worked  out  on  loose  sheets  and  afterwards 
entered  in  the  blank  books.  The  rest  of  the  sets  should  be  entered  in 
the  blank  books  without  first  entering  them  on  loose  sheets  of  paper. 

All  exercises  and  sets  should  be  submitted  to  the  teacher  for  correction  before 
proceeding  with  the  next. 


CHAPTER  I 
THE  CASH  BOOK 


Every  individual  should  keep  some  record  of  his  receipts  and  ex- 
penditures of  cash.  Whether  that  record  is  a  simple  one  or  one  that 
gives  much  detailed  information  depends  upon  the  individual. 

A  person  that  keeps  an  exact  account  of-  his  receipts  and  expend- 
itures cultivates  systematic  habits.  He  is  more  likely  to  spend  his 
money  wisely  and  to  save  than  the  one  who  keeps  no  such  record. 
It  enables  him  to  select  between  the  necessary  expenditures  and  the 
unnecessary. 


v^^^-^',  'ic&sriy.  /f — 

RECEIVED 

PA  II 

3 

Qa^iS. 

7- 
3 

t 

— ■ 

3 

<r 

//          -^v-^^^t>iZ^iy^f^zyL^. — ' 

/ 



£ 

„      ^-v^c^lJ- 

zs- 

7 
9 

/ 

J-o 

3 

so 

// 

3 

3o 

/s 

'  V 

J-  * 

/ 

/     3- 

'7 

J~o 

'7 

J~o 

/£ 

j? 

&s 

4  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

These  records,  in  order  to  be  of  value,  should  be  kept  in  such  a  way 
as  to  give  the  necessary  information  in  systematic  form.  The  book 
used  for  this  purpose  is  the  cash  book.  It  may  be  kept  on  one  page 
or  on  two  opposite  pages.  The  one-page  cash  book  is  well  adapted 
to  the  keeping  of  simple  personal  accounts  in  a  small  pocket  cash  book. 
By  universal  custom,  receipts  are  placed  in  the  left-hand  column  and  pay- 
ments in  the  right-hand  column.  A  form  suitable  to  the  individual  that 
does  not  have  a  large  number  of   transactions   is   given   on  page  three. 

It  is  a  good  plan  to  balance  the  cash  book  often.  It  may  be  done 
weekly  or  semi-monthly  but  should  always  be  balanced  at  the  foot  of 
each   page. 

To  Balance  a  One-Page  Cash  Book: 

1.  Add  in  pencil  the  "Received"  column  and  the  "Paid"  column. 
Make  small,  neat,  pencil  figures  just  below  the  line  on  which  the  last 
item  is  written.     The  pencil  figures  should  not  be  written  on  the  line. 

2.  Subtract    the    amount    paid    out    from    the    amount    received. 

3.  Enter  this  difference  in  the  "Paid"  column,  preferably  in  red 
ink,   as  "Balance  on  hand." 

4.  Rule  a  single  red  line  across  the  "Received"  and  "Paid" 
columns   to  show  that   the  columns  are   to   be  added. 

5.  Put  the  equal  totals  on  the  next  line  below  in  black  ink. 

6.  Rule  double  red  lines  on  the  line  on  which  the  totals  are  entered. 
These  double  lines  should  extend  across  the  "Received"  and  "Paid" 
columns  and  also  across  the  date  column. 

7.  The  "Balance  on  hand"  should  be  brought  down  below  the 
ruling  in  black  ink  and  entered  in  the  "Received"  column  unless  that 
page  of  the  cash  book  is  full,  then,  it  should  be  taken  to  the  top  of  the 
next  page.  This  balance  shows  the  amount  on  hand  to  use  for  the 
next  period. 

Ruling.  Before  writing  out  any  exercises  it  will  be  necessary  to 
practice  ruling. 

Directions : 

1.  Use  red  ink  for  ruling. 

2.  The  ruling  edge  of  the  ruler  should  not  touch  the  paper,  but 
the  bevel  should  run  down  under. 

3.  The  hand  should  be  turned  on  its  side  and  the  penholder  held 
at  an  angle  of  about  thirty-five   to  forty  degrees. 

4.  Double  lines  should  be  ruled  by  turning  the  hand  out,  but 
without  moving  the  ruler. 

5.  A  medium  fine  pen  should  be  used  so  as  to  make  a  narrow, 
smooth  line. 


THE  CASH  BOOK  5 

Exercise  in  Ruling: 

1.  Take  a  sheet  of  ruled  paper  and  rule  a  line  across  the  page  on 
each  line  of  the  page. 

2.  On  the  other  side  of  the  paper,  rule  a  line  across  the  page  on 
the  line.  Without  moving  the  ruler,  rule  a  line  under  the  first  just  far 
enough  away  so  that  it  does  not  touch  the  first  line.  In  the  same  way, 
rule  double  lines  on  each  line  on  the  page. 

3.  Take  a  sheet  of  paper  ruled  with  horizontal  lines  and  rule  a 
cash  book  like  the  model  given. 

This  practice  should  be  continued  until  the  pupil  can  rule  exactly 
and  neatly. 

Exercise  1.  Enter  the  following  transactions  on  a  sheet  of  paper 
ruled  like  the  model  cash  book  or  on  journal  paper  used  as  a  cash  book. 

January  1.  Balance  on  hand,  $7.15.  (Enter  this  in  the  "Re- 
ceived" column  because  it  represents  the  amount 
left  at  the  end  of  December  to  be  used  for 
January.) 

2.  Paid  for  laundry,  45f£. 

3.  Received  wages,  $7.50. 

3.  Paid  board  to  date,  $3.50. 

5.  Paid  for  car  fare,  50^. 

6.  Paid  dentist,  $1.50. 

7.  Received  for  addressing  envelopes,  $1. 

8.  Paid  for  hat,  $3.50. 

9.  Paid  for  basket  ball  game,  25j£. 
10.  Received  wages,  $7.50. 

10.  Paid  board  to  date,  $3.50. 

11.  Paid  for  church,   10c\ 

12.  Deposited  in  Savings  Bank,  $3. 

Money  put  into  a  savings  bank  is  entered  as  paid  out  because  it  has  gone  out  of  your  pos- 
session.    The  Savings  Book  will  show  at  any  time  how  much  you  have  in  the  bank. 

15.     Paid  for  subscription  to  the  System  Magazine  for  one 
year,    $2. 

15.  Paid  for  stamps,  20j£. 

Balance  the  cash  book  and  bring  the  balance  down  January  16. 
Then  make  the  following  entries  on  the  same  sheet,  below  the  balance 
brought  down. 

16.  Paid  for  book,  50j£. 

17.  Received  wages,  $7.50. 

19.     Paid  board  to  January  17,  $3.50. 

23.  Paid  for  photo  supplies,  75^. 

24.  Received  wages,  $7.50. 

24.  Paid  board  to  date,  $3.50. 

25.  Paid  for  shoe  polish,   10j£. 
27.     Paid  for  gloves,  $1.25. 


6 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


28.     Paid  for  coat,  $9.50. 

31.     Received  wages,  $7.50. 

31.  Paid  board  to  date,  $3.50. 
Balance  the  cash  book  and  bring  the  balance  down  February  1. 
It  is  even  more  necessary  in  handling  the  funds  of  others  to  keep  a 
systematic  record  of  receipts  and  payments.  The  transactions  of  the 
treasurer  of  a  school  paper,  of  a  school  society,  or  of  an  athletic  asso- 
ciation may  be  kept  in  the  same  way,  but  it  is  better  to  use  a  two- 
page  cash  book,  with  the  receipts  on  the  left  page  and  the  payments  on 
the  right  page  opposite.  The  following  form  shows  the  transactions  of 
the  treasurer  of  a  school  paper. 


"^^^^^^C^/K^^^^^/  ^J^t^-  /<f- 


&z. 

/ 

c 

/it 

/t 

Zo 
Z3 

Zf 

<y,~A^kzstst-J '  s&scC'.  *fo-4S  U^ur^<//. 

3  ■ 
3 

Z 

7* 

Zo 

7s 
z^r 

/z-/ 

7/ 

7^ 

f  O 

/<?3 

£J~ 

/TfaLAs: 

/ 

■ 

3<A 

#£ 

It  is  usually  best  to  enter  the  balance  on  hand  at  the  beginning  of 
the  month  in  the  second  column  of  the  Cash  Receipts,  so  as  to  keep 
the  receipts'  for  the  month  separate  from  the  balance  at  the  beginning  of 
the  month. 


THE  CASH  BOOK 


In  balancing  a  two-page  cash  book,  the  last  column  of  the  Receipts 
side  is  used  for  the  total  cash  received;  the  last  column  of  the  Pay- 
ments side  is  used  for  the  total  cash  paid  out  and  for  the  balance  on 
hand.  The  closing  single  and  double  lines  should  be  ruled  straight 
across  on  both  the  Receipts  and  Payments  sides  without  moving  the 
ruler.  The  balance  should  be  brought  down  below  the  double  lines  on 
the  Receipts  side  or  taken  to  the  top  of  the  next  page.  It  should  be 
dated  March  1,  and  put  in  the  last  money  column  to  show  the  amount 
on  hand  March   1,  left  from  February. 

Exercise  2.     Use   two   opposite   pages   of   a  sheet  of  journal   paper, 


l&s^zz^d^y/^zZ'^^  /a- 


\jte^-: 


7 
f 

/& 

/r 

lo 

z7 


//J 

2- 

z 
/ 

3 
/ 
/ 
X 


2-cT 


_AJA 


/fj 


"7 


&j- 


heading  the  left  Cash  Receipts,  October  19 —  and  the  right  Cash  Pay- 
ments, October  19 — ,  and  enter  the  transactions  of  the  treasurer  of  a 
school  athletic  association. 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


y^tdf ,  //Y'a^i^,  /j 


/  7     ^-^ZZ^d^A^-^d-ZZ^E^d^ 


^ 


~Xo-^z-<d^^^d-zz^U-^d^ 


utjb<4/.     /      /^zz^zz^z^c^e^ ', 


/  o  ys 
yf/  y~s 


67 


/jr 


6  /  y  2-S~ 


2-/3  fo 


f3/ 


0J- 


tAofz-o 


TRANSACTIONS 


$25. 


October     1.  Received  dues  from   100  members, 

2.  Paid  telephone  charges,  25j£. 

3.  Paid  for  1  doz.  receipt  books,  $1. 

5.  Paid  for  advertisement  of  tomorrow's  game,  $7.25. 

6.  Receipts  of  Grand  Rapids  football  game,  $98.75. 

6.  Paid  for  athletic  field  for  Grand  Rapids  game,  $10. 

6.  Paid  Grand  Rapids  team,  $60. 

9.  Received  dues  from  75  members,  $18.75. 

10.  Paid  for  football,  $3.50. 

11.  Paid  for  stationery,  $1.50. 

13.  Receipts  of  Oak  Park  football  game,  $125.75. 

13.  Paid  for  athletic  field  for  Oak  Park  game,  $10. 

13.  Paid  officials  of  Oak  Park  game,  $5. 

13.  Paid  Oak  Park  team,  $75. 

18.  Received  dues  from  50  members,  $12.50. 

20.  Paid   expenses   of  faculty   manager   attending   Chicago 
game,  $6.25. 


THE  CASH  BOOK 


c^t^iy,  /^ 


3  /     A^-z2^^^^z^c^/xzr^t^-^Ct^^>z-<^- 


2-S- 


ts-y 


7 

// 

32- 


fo 


42-Z 


2-o 


<T3/ 


os- 


23.  Paid  for  banner  for  advertising  game,  $3.25. 

27.  Receipts  of  Gary  game,  $105.85. 

27.  Paid  Gary  team,  $65. 

27.  Paid  officials  of  Gary  game,  $5. 

27.  Paid  for  athletic  field  for  Gary  game,  $10. 

30.  Paid  for  two  new  suits,  $6.50. 

Balance  the  cash  book,  October  31,  and  bring  the  balance  down 
November  1. 

A  small  retail  store  doing  a  cash  business  would  keep  its  account  of 
cash  received  and  paid  out  in  a  two-page  cash  book.  Such  a  cash  book 
would  show  receipts  of  cash  from  the  proprietor  for  his  investment  and 
from  the  sale  of  goods.  It  would  show  payments  of  cash  for  goods 
bought,  for  expenses  incurred  in  carrying  on  the  business,  and  for  with- 
drawals of  the  proprietor  for  his  personal  use.  The  receipts  of  cash 
would  be  entered  from  the  cash  register  or  from  cash  slips  at  the  end 
of  each  day,  while  the  payments  would  be  entered  at  the  time  of  making 
the  payment.   In  the  model  given  above  the  cash  sales  are  entered  weekly. 


10  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Exercise  3.     Enter    the    receipts    and    payments    of    a    small    retail 
business  in  a  two-page  cash  book,  and  balance  it. 

TRANSACTIONS 

November     1.  Balance  of  cash  on  hand,  $812.75. 

3.  Paid  rent  of  store  for  November,  $30. 

4.  Bought  goods  of  S.  E.  Gray  for  cash,  $308.25. 
6.  Paid  for  stationery,  $6.45. 

8.  Cash  sales  for  the  week,  $37.20. 

12.  Bought  goods  of  G.   B.  Bond  for  cash,  $178.95. 

15.  Cash  sales  for  the  week,  $46.75. 

17.  Paid  gas  bill,  $2.15. 

19.  Paid  telephone  bill,  $3.50. 

22.  Cash  sales  for  the  week,  $51.90. 

23.  Bought  goods  of  C.  B.  James  for  cash,  $202.85. 
25.  Paid  for  2  tons  coal,  $11.50. 

27.     Paid  clerk's  salary,  $30. 

29.     Cash  sales  for  the  week,  $68.15. 


CHAPTER  II 
THE  MERCHANDISE    AND  EXPENSE  ACCOUNTS 


The  purpose  of  the  cash  books  already  studied  has  been  to  show 
the  cash  received  and  paid  out  and  the  balance  of  cash  on  hand.  That 
may  be  sufficient  information  concerning  an  individual's  private  trans- 
actions. It  may  be  sufficient  for  the  treasurer  of  a  small  society  or 
association,  but  not  for  a  mercantile  business. 

The  cash  book  gives  detailed  information  of  receipts  and  payments 
of  cash,  but  not  in  a  form  so  that  the  merchant  can  easily  and  quickly 
find  out  how  much  was  received  for  this  purpose  or  that  or  how  much 
was  paid  out  for  one  thing  or  the  other.  It  is  difficult  to  obtain  this 
information   for   any    considerable   period   from   the   cash   book. 

The  ledger,  a  book  of  accounts,  is  used  for  this  purpose.  The 
cash  book  is  a  book  of  entry,   the  ledger  classifies  these  entries. 

The  ledger  is  a  book  in  which  the  items  from  the  original  books  of 
entry   are   classified   under   appropriate   headings   called   accounts. 

The  ledger  is  divided  into  two  sides,  a  debit  and  a  credit.  The 
debit  is  to  the  left  and  the  credit  to  the  right.  The  ruling  of  each 
side  is  the  same.     The  ordinary  form  of  the  ledger  follows: 


Date 


DEBIT 
Detatls 


Folio     Amount 


Date 


CREDIT 
Details 


Folio    Amount 


11 


12 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


If  the  business  is  a  cash  business,  the  chief  accounts  necessary  to 
classify  the  items  of  cash  received  and  paid  out  are  the  Merchandise  and 
the  Expense  accounts.  This  does  not  include  the  proprietor's  invest- 
ments and  withdrawals  which  will  be  studied  in  the  next  chapter. 

The  Merchandise  Account.  This  account  is  kept  to  show  our  deal- 
ings in  the  goods  that  are  a  part  of  the  stock  in  trade  of  the  business. 

Whenever  merchandise  is  sold,  the  seller  makes  out  an  invoice  and 
sends  it  to  the  buyer.  It  contains  the  parties  and  their  addresses,  the 
date,  the  terms,  and  the  articles  sold.  It  may  contain  a  great  many 
things  in  addition;  such  as,  advertising  matter,  details  of  the  shipment, 
and  by  what  railroad  shipped.     A  popular  form  is  illustrated  here. 


Milwaukee*  Wis., 


/<?,    19. 


>£/, 


TO 

Terms 


t^^L^y 


r^g^gg^ 


'^/A^y  >^JCx^>^A 


DR. 


UL 


-£azs.  ^J^y^^i^y         3 


££» 


&U 


£ 


-£££.  *p£t*^^jrjZ£™^  u- 


/s 


33 


Z-o 


Jl 


-J^lj  ^^f^2^£s^JLLf£.  z/y 


u^- 


i^L 


K-J£%^ 


7^7zsL^  ?^y 


~*y    <f.~g.  7?U4&t 


In  this  invoice,  the  seller  is  Miller  &  Tharp  and  the  buyer,  Charles 
Osborn. 

All  merchandise  bought,  whether  cash  is  paid  for  it  or  time  is  given 


THE  MERCHANDISE  AND  EXPENSE  ACCOUNTS 


13 


for  payment,  is  a  debit  to  Merchandise.     All   merchandise  sold  whether 
for  cash  or  on  time  is  a  credit  to  Merchandise. 

The   Merchandise  account  illustrated   here  is   explanatory   and   con- 
tains more  details  than  are  necessary  in  actual  practice. 


PURCHASES 


/r 

Xo 

2-t/ 


C/f/Oo/:,  /J~/c£€L. 


//r 

/S2- 


to 


¥rys~ 


3o  ^y^z^Ay 


7^ 
77 

3S\ 

/3& 

r/ 


2~S 


7s 

3S 


In  this  account,  on  the  debit  side,  all  items  named  Cash  mean  that 
merchandise  was  purchased  and  that  cash  was  given  in  payment.  All 
items  named  Account  mean  that  merchandise  was  purchased  but  that 
instead  of  paying  cash,  we  owe  some  one  for  the  merchandise. 

On  the  credit  side,  all  items  named  Cash  mean  that  merchandise 
was  sold  and  that  cash  was  received  in  payment.  All  items  named  Ac- 
count mean  that  merchandise  was  sold  but  that  instead  of  receiving 
cash,   some  one  owes  the  business  for  it. 

The  Expense  Account.  The  Expense  account  is  debited  for  all  sums 
paid  out  for  carrying  on  the  business.  In  a  small  business,  one  general 
account  is  kept  for  all  expenses,  such  as,  rent,  clerk  hire,  fuel,  postage, 
stationery,  printing,  advertising,  telegrams,  telephone,  etc.  In  a  larger 
business  where  more  detailed  information  is  necessary,  a  separate  ac- 
count is  usually  kept  for  each  of  the  most  important  classes  of  expense. 
The  name  of  the  account,  then,  indicates  the  nature  of  the  items  to 
be  charged  to  that  account;  as,  Rent,  Salaries,  Fuel  and  Light,  Station- 
ery, Advertising,  etc. 

An  itemized  statement  of  the  things  bought  or  of  the  services 
rendered  for  carrying  on  the  business  is  called  a   bill.     It  may   be  the 


14 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


same  in  form  as  an  invoice,   differing  only  in   the  nature  of  the  things 
purchased,   or,   it   may  take  a   different  form. 

The  form   here  illustrated   is  a  common   one. 


Milwaukee,  Wis., 


Wl^Lsf^U?^!  J^2j2L^LiZLd222=L 


3,     19- 


Z&^&tiCiLeJL 


Zt£^£t2Li±Z^ 


BOUGHT  OF \yY7XSV7(/C 

Tenng   W^W;17^  2=.  % 


?^^ 


jL 


jfi^deiZleL  AXiT-trff'S.  3< 


QJl^L&aZAd. 


X 


/ 


\d^L^ 3  oq 


jx- 


J. 


3£V 


/ 


/ 


•^ 


p 


■s~ 


^s^l^!   %■"/. 


a. 


rf^y^  *3 ',  /& 


By  many  the  word  bill  is  used  to  refer  to  a  purchase  either  of 
merchandise  or  of  something  to  be  used  in  carrying  on  the  business. 

The  Expense  account  is  credited  when  something  that  had  been 
purchased  for  carrying  on  the  business  is  sold,  or  when  a  rebate  is  ob- 
tained on  something  that  has  been  purchased  and  charged  to  Expense. 

An  explanatory   Expense  account  is  given  in   detail  on  page  15. 

Of  the  items  on  the  debit  side,  the  first  means  that  money  was  paid 
out  for  the  use  of  a  room  or  building.     The  second,  third,  fourth,  and 


THE  MERCHANDISE  AND  EXPANSE  ACCOUNTS 


15 


3    @£fic*s4nr£j 


7 


'o  f/frzCv-eAd2^Uz*7 


/J- 


7-3~— 

3~2^r 


3 

/ 


tJ- 


££3~o 
2-3 


*73~ 
/ 


'f- 


~W/trzz^~ 


3~ 


3 


sixth  mean  that  the  business  bought  something  for  the  carrying  on  of 
the  business.  The  fifth,  seventh,  and  eighth  mean  that  money  was 
paid  out  for  services  rendered  the  business.  The  credit  of  $5  means 
that  some  of  the  coal  bought  for  the   use   of  the  business  has  been  sold. 

Everything  that  appears  in  the  ledger  accounts  must  first  be  entered 
in  the  cash  book  or  in  another  book  of  entry.  .The  ledger  is  a  book  of 
classification  and  not  a  'book  of  entry.  In  order  to  classify  entries  in 
the  ledger  each  entry  in  the  cash  book  must  be  given  the  name  of  the 
account  under  which  the  item  is  to  be  transferred.  Instead  of  writing 
"Invoice  of  S.  N.  Carson,"  the  name  of  the  account  affected  will  be 
given  first,  as  follows:  "Merchandise — Invoice  of  S.  N.  Carson."  Instead 
of  writing,  "Clerk's   salary,"    "Expense — Clerk's   salary"  will  be  written. 

The  cash  book  of  the  retail  store  illustrated  in  Chapter  I  is  rewrit- 
ten on  pages  16  and  17  to  show  the  accounts  affected  by  the  receipts 
and  payments  of  cash. 

Exercise  4.  Use  two  opposite  pages  of  a  sheet  of  journal  paper  as 
a  cash  book.  Enter  the  following  transactions  by  naming  the  accounts 
affected  by  the  transactions.  Use  the  cash  book  illustrated  on  pages 
16  and   17  as  a  guide. 


September     1. 


The  balance  of  cash  on  hand  is  $478.15.  (Enter 
this  in  the  last  column  of   the   Cash   Receipts.) 

3.     Paid  rent  of  store  in  cash,  $35. 

5.  Bought  an  invoice  of  merchandise  of  J.  C.  Dryer 
for  cash,  $196.15. 


16 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


^3^^^^^^^^^^^,  Styezsl4>nS> 


L.    F         ACCOUNT    TO    BE    CREDITED 


r 


yy/a^y; 

/ 

3 
/o 

3/ 
3/ 

//                  * 
//                   » 

//                   v 

/o 

3t 
£>7 

7^ 

X-o 

7s 

/.r 

C/y 
2/5 

IjT 

to 

f.?y 

<7,r 

£%fat/. 

/ 

¥of 

2o 

6.  Cash    sales   for   the    week,    $49.20. 

8.  Bought   3   tons   of   coal    at  $4.95  a  ton. 

10.  Paid  the  H.   C.   Miller  Co.  for  office  books,   $12.15. 

13.  Cash    sales    for    the    week,    $87.55. 

15.  Bought   an   invoice    of   merchandise    of    C.    D.    Paul 

for  cash,  $217.65. 

18.  Paid   the   Herald    Co.    $13.80   for   advertising. 

20.  Cash  sales  for  the  week,   $163.90. 

23.  Paid  for  telephone,  $4.50. 

26.  Bought  an  invoice  of  merchandise  of  G.  E.  Thomas 

for  cash,  $206.45. 

27.  Cash   sales  for  the   week,   $138.95. 

29.  Paid  J.   C.   Foster  for  repairs  to  store,  $9.35. 

30.  Paid  clerk's  salary,  $24. 

30.  Cash  sales  for  two  days,  $36.55. 


Balance  the  cash  book. 


THE  MERCHANDISE  AND  EXPENSE  ACCOUNTS 


17 


L.   F.        ACCOUNT 


BE    DEBITED 


'aAS. 


/ 

3 

/z 

/■f 

3/ 
3/ 
3/ 


'xcrzct-eJ' 


^^^fw^      // 


7 
7A 


7^ 


37^  — 


4°. 


f3  / 


2-c 


OJ- 


Before  studying  the  next  chapter,  make  a  careful  study  of  the  cash 
book  here  illustrated,  as  it  is  the  form  that  will  be  used  in  the  first  practice 
work. 

The  explanations  are  very  important,  as  they  give  information  that 
is  often  very  valuable  to  the  business.  They  should  be  clear  and  definite 
and  yet  brief.  Only  one  line  should  be  used  for  the  explanation  of  each 
transaction  because  it  is  a  poor  practice  to  leave  a  line  in  the  amount 
column  blank. 


CHAPTER  III 
ACCOUNTS  WITH  PERSONS 

Business  is  no  longer  carried  on  chiefly  for  cash.  In  wholesale, 
jobbing,  and  manufacturing  businesses,  purchases  and  sales  for  cash  are 
few  in  number.  In  the  retail  trade,  cash  purchases  and  sales  are  much 
more  frequent,   but  there  are  many  purchases  and  sales  on  account. 

A  purchase  "on  account"  means  that  the  buyer  agrees  to  pay  for 
the  invoice  after  some  time  has  elapsed,  depending  on  the  terms  of  the 
sale  or  the  practice  of  the  particular  business.  In  order  to  record 
these  purchases  and  sales  on  account,  accounts  with  persons  must  be 
kept. 

Accounts    are    kept    with    three    different    classes    of    persons: 

1.  Those    from    whom    the    business    buys,    called    creditors. 

2.  Those    to    whom    the    business    sells,    called   customers. 

3.  Those  that  invest  in    the   business,   called  proprietors  or  owners. 
Accounts    with    creditors    and    with    customers    are    called    personal 

accounts.  Accounts  with  proprietors  or  owners  are  called  capital  or 
ownership  accounts. 

An  account  with  a  creditor  or  with  a  customer  is  a  personal  account 
whether  it  records  dealings  with  an  individual,  a  partnership,  or  a  cor- 
poration. 

Accounts  With  Creditors.  When  goods  are  bought  on  account  it  is 
necessary  for  the  business  to  keep  a  record  of  the  persons  to  whom  the 
money  is  owed,  how  much  is   owed,    and   when  it   should   be  paid. 

If  goods  are  purchased  on  account,  Merchandise  is  received  and  is 
debited,  but  the  business  does  not  pay  out  cash  for  it.  Some  other  ac- 
count must  be  credited,  that  of  the  person  from  whom  the  business 
buys. 

When  the  business  pays  this  account  in  full  or  in  part,  the  creditor's 
account  must  be  debited  to  show  how  much  of  the  indebtedness  is  can- 
celed. 

Rule.  Credit  a  creditor's  account  when  the  business  becomes  in- 
debted to  him. 

Debit  a  creditor's  account  when  the  business  pays  the  creditor 
on  account,   or  is  allowed  something  for  returned  or  damaged  goods. 

18 


ACCOUNTS  WITH  PERSONS 


19 


An  explanatory  creditor's  account  would  show  merchandise  bought 
from  him  on  the  credit  side  and  payments  in  the  form  of  cash,  notes  or 
drafts,  or  goods  returned  on  the  debit  side.  In  the  following  creditor's 
account,  the  credit  side  shows  that  the  business  bought  goods  from  S.  N. 
Dutton  at  different  times  on  account.  The  debit  side  shows  that  the 
business  paid  him  cash,  gave  him  a  note,  and  returned  goods  to  him. 
The  business  still  owes  S.  N.  Dutton  the  difference  between  the  two 
sides,  $330.90. 


-*3C  /(.  <=>£tlcj^r?^/ 


t?- 


(M 


\3o 


'2-    "to^zz^^C^ 
2.2-  /fcc&s^Ose&BL. 

2  J  fce^USi^i^-c( 1a*rzrp£a 


~W/ZL<d^zS 


7^ 

/  o  o 
/Jr? 


C</j-\%A. 


2-~r~ 


3 
/J- 


3^r 


7^ 


Exercise  5.  On  ledger  paper  open  accounts  for  D.  E.  Tabor  and 
K.  L.  Minn.  Enter  the  following  transactions  in  the  ledger  accounts 
with  an   explanation   of  each  item. 

October     3.     Bought  an  invoice  of  goods  of   D.   E.   Tabor,   on  ac- 
count,  10  days,  for  $386. 
5.     Bought  an  invoice  of   goods   of   K.    L.    Minn,    on   ac- 
count, for  $450. 
7.     Bought  an  invoice  of  goods  of   D.   E.   Tabor,   on   ac- 
count,  15  days,  for  $275. 
10.     Paid  K.   L.   Minn  cash,   $200,    on  account. 
13.     Paid  D.   E.   Tabor  cash,  $386,  for  invoice  of  the  3rd. 
15.     Bought   an   invoice   of   goods   of    K.    L.    Minn,  on  ac- 
count, 15  days,  $230. 
20.     Paid   K.    L.    Minn   cash   on   account,   $100. 
22.    .Paid  D.  E.  Tabor  cash  for  invoice  of  the  7th,  $275. 
25.     Returned    damaged    goods    valued    at  $15,     to   K.   L. 
Minn,   on  invoice   bought  on  the   15th. 
This   reduces   the   amount   the   business   must   pay   K.    L.    Minn   by 
$15.     Allowances   for   returned   goods    or   damaged   goods  are  always  re- 
corded on  the  opposite  side  of   the   personal    account  from  the  purchase 
of  the  goods. 

28.     Bought  an  invoice  of  goads   of   D.    E.   Tabor,   on   ac- 
count, 30  days,  for  $345. 


20 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


30.     Paid  K.  L.    Minn  for  invoice  of  the  15th,  less  the  de- 
duction for  damaged  goods,  cash,  $215. 

How  much  does  the  business  owe  D.  E.  Tabor? 

How  much  does  the  business  owe  K.  L.  Minn? 

Accounts  With  Customers.  When  goods  are  sold  on  account,  the 
account  of  the  buyer  must  be  debited  for  the  amount  of  the  sale,  be- 
cause no  cash  is  received  but  the  buyer  owes  the  business  for  it.  He  in 
this  way  becomes  a  debtor  to  the  business. 

'    When  the   customer   makes  a  payment  on  account   or  is   given   an 
allowance  for  damaged  or  returned  goods,   his  account  is  credited. 

Rule.  Debit  a  customer's  account,  when  he  becomes  indebted  to 
the  business. 

Credit  a  customer's  account  when  he  makes  a  payment  on  account 
or  is   given   an   allowance  for  returned   or   damaged   goods. 

An  explanatory  customer's  account  would  show  on  the  debit  side 
merchandise  sold  to  him  and  on  the  credit  side  payments  in  the  form  of 
cash,    notes,    drafts,    or   returned   goods. 

An  explanatory  customer's  account  follows. 


-€..&. 7>S^cJ^t>yty 


i9- 

% 


cry 


/Z 


77 


3o 


» 


r 
'7 

3o 


3y/\J~o 


AjT/ 


2-S- 


This  account  shows  that  C.  S.  Griffin  owes  the  business  the  balance 
of  the  account,  $97.30. 

Exercise  6.  On  ledger  paper  open  accounts  for  F.  A.  Timm  and 
M.  E.  Willis.  Enter  the  following  transactions  in  the  ledger  accounts 
with   an   explanation   of   each  item. 

November     3.     Sold  F.   A.   Timm  an  invoice  of  goods,  on  account, 
10   days,    for    $295. 
5.     Sold  M.   E.   Willis  an  invoice  of  goods,  on  account, 

.  15  days,  for  $235. 
7.     F.    A.    Timm    returned    damaged    goods    valued    at 


9.     Sold  F.-  A.   Timm  an  invoice  of  goods,  on  account, 

for  $412. 


ACCOUNTS  WITH  PERSONS  21 

12.  Sold  M.  E.   Willis  an  invoice  of  goods,   on  account, 

for  $157.50. 

13.  Received    of    F.    A.    Timm    for   invoice    of    the    3rd, 

less  $20    for    damaged    goods  returned,  cash,  $275. 
16.     M.    E.    Willis    returned    damaged    goods    valued    at 

$15. 
20.     Received    cash    of    M.    E.    Willis   for   invoice    of   the 

5th,  $235. 
23.     F.   A.   Timm  paid  $200,  on  account. 
26.     Sold   an   invoice    of    goods    to    F.    A.    Timm    on    ac- 
count, for  $97. 
28.     M.  E.   Willis  paid  $100,  on  account. 
How  much  does  F.  A.   Timm  owe  the  business? 
How  much  does  M.  E.  Willis  owe  the  business? 
The  Capital  Account.     The  account  kept  with  the  proprietor  to  show 
his  relation  to  the  business  is   called  the  proprietor' s  account  or  the  cap- 
ital account. 

This  account  is  credited  for  all  sums  invested  by  the  proprietor. 
It  is  debited  for  all  sums  withdrawn  from  the  business  fop  personal 
use.  A  sum  withdrawn  may  be  money  withdrawn,  merchandise  taken 
for  personal  use,  or  the  personal  debt  of  the  proprietor  paid  by  the 
business. 

Exercise  7.  Open  ledger  accounts  with  S.  E.  Curtis,  B.  N.  Carr, 
C.  S.  Ross,  and  F.  I.  Bowman.  Enter  the  following  transactions  in  the 
proper  accounts,  with  an  explanation  of  each  item. 

April    2.     Bought  an  invoice   of  goods  of  B.   N.    Carr,   on   account, 
15  days,  for  $385.25. 
3.     Sold  an  invoice  of  goods  to  S.  E.  Curtis,  on  account,  for 
$137.50. 

5.  Sold    C.    S.    Ross    an    invoice    of    goods,    on    account,    15 

days,  for  $43.20. 

6.  Sold   S.    E.    Curtis   an   invoice   of   goods,    on    account,    30 

days,  for  $58.95. 
8.     Bought  an  invoice  of  goods  of  F.  I.  Bowman,  on  account, 

for  $476.35. 
10.     Paid  B.   N.   Carr  cash,   on  account,   $150. 
12.     S.   E.   Curtis  paid  $75,    on  account. 
14.     Paid   F.    I.    Bowman   cash,    on   account,    $250. 

16.  Sold   C.    S.    Ross    an    invoice    of    goods,    on    account,    for 

$123.45. 

17.  Paid   B.    N.    Carr   cash   on  account,   $100. 

19.  Bought    of    F.    I.    Bowman    an    invoice    of   goods,    on    ac- 

count, for  $236.45. 

20.  C.   S.   Ross  paid   his  invoice  of   the'  5th  in  cash,   $43.20. 


22  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

22.     Paid  B.   N.   Carr  the  balance  due  him  on  the  invoice  of 

the  2d,  S135.25. 
25.     Sold    S.    E.    Curtis    an   invoice    of   goods,    on    account,  10 

days,  for  $257.25. 
30.     Paid  F.   I.   Bowman  cash  on  account,  $275. 
Which  of  these  accounts  are  customer's  accounts? 
Which  are  creditor's  accounts? 
How  much  does  each  customer  owe? 
How  much  does  the  business  owe  each  creditor? 


CHAPTER  IV 
PRINCIPLES  OF  DOUBLE  ENTRY  BOOKKEEPING 

A  Book  of  Entry  is  a  book  in  which  the  transactions  are  entered  in 
systematic  form  as  they  occur. 

The  cash  book  is  the  only  book  of  entry  so  far  used.  In  it  are 
entered  all  receipts  and  payments  of  cash,  together  with  the  accounts 
affected.  Every  cash  book  entry  has  a  double  effect.  An  entry  on  the 
Cash  Receipts  is  a  debit  of  Cash  and  a  credit  of  the  account  named 
there.  An  entry  on  the  Cash  Payments  is  a  credit  to  Cash  and  a  debit 
to  the  account  named  there. 

These  entries  are  classified  under  their  appropriate  headings  in  the 
ledger.     This  is  called  posting. 

In  the  study  of  purchases  and  sales  of  merchandise  on  account  it 
was  found  necessary  to  open  accounts  in  the  ledger  to  show  our  dealings 
with  creditors  and  with  customers.  The  nature  of  these  accounts  has 
been  explained  and  a  study  made  of  the  items  that  make  up  the  ac- 
count. 

It  is  not  desirable  to  enter  the  transactions  of  a  business  in  the 
ledger  as  they  occur.  The  transactions  should  first  be  entered  in*  a 
book  of  entry  and  then  classified  under  appropriate  headings  in  the 
ledger.  A  new  book  of  entry  is  necessary  as  the  cash  book  can  contain 
nothing  but  cash  transactions. 

The  Journal.  The  journal  is  a  book  of  entry  in  which  transactions 
are  entered  as  they  occur  with  a  debit  for  every  credit,  or  one  or  more 
debits  that  are  equal  to  one  or  more  credits.  From  this  principle  of 
equality,   we'  obtain  the  following  rule. 

Rule  of  Double  Entry.  Equal  debits  and  credits  must  result  from 
each  transaction. 

By  this  is  meant  that  every  entry  has  a  double  effect,  a  debit  and  a 
credit  effect.  This  double  effect  may  be  named  and  each  effect  trans- 
ferred to  the  ledger  as  it  is  from  the  journal,  or  one  effect  may  be  un- 
derstood and  transferred  to  the  ledger  in  total,   as  it  is  in  the  cash  book. 

General  Rule  of  Debits  and  Credits. 

Debit  what  the  business  receives  or  the  account  that  receives  the 
benefit. 

23 


24 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Credit  what  the  business  parts  with  or  the  account  that  yields  the 
benefit. 

Model  entries  for  purchases  and  sales,  together  with  a  memorandum 
for  beginning  the  business  will  now  be  shown  in  the  journal. 


<  A  /?■' 


PAGE    1 


/ 
3 

/ 


-©C  "^^^^«i^S^^^^^<^^^^-^<^/^^W^ 


/ 


<£^7?, 


7^Ld^y, 


7 


Z^Ld^y, 


pJLH.6fyifiJ^    #H 


t^W-2/"Z>-Z^^<£^ 


t^^c?<^/^//7^T^^^^-«>2>^:/   3o^s^€Z^.- 


2-j 


3* 


>/  o 


3~o 


2-J- 


/a 


/ —      /7 — • 


/Xy 


J~o 


34 


>/  o 


r^r 


z<r 


Analysis  of  the  Journal.  The  General  Rule  of  Debits  and  Credits 
will  now  be  applied  to  the  journal  entries. 

First  Entry.     Merchandise  is  debited  because  it  is  received. 

J.  C.  Braden's  account  is  credited  because  he  yields  the  benefit  of 
the   exchange,    that   is,    gives   to   the   business   merchandise   and   receives 


PRINCIPLES  OP  DOUBLE  ENTRY  BOOKKEEPING 


25 


nothing  in  return  except  an  implied  promise  to  pay  him  at  some  future 
time.  The  items  purchased  need  not  be  recorded  because  when  a  busi- 
ness buys  goods  it  will  receive  an  invoice  with  the  items  listed.  The 
invoice  is  kept  for  reference  in  some  convenient  file. 

Second  Entry.  C.  D.  Hawks'  account  is  debited  because  he  re- 
ceives the  benefit  of  the  exchange  and  gives  the  business  nothing  in  re- 
turn  except   an   implied   promise   to   pay. 

Merchandise  is  credited  because  it  is  parted  with.  The  items  sold 
must  be  recorded  as  the  business  gives  out  the  invoice  to  the  customer 
and  must  have  a  record  of  what  was  sold,  in  permanent  form. 

Third  Entry.     This  entry  is  similar  to  the  first. 

Fourth  Entry.  This  entry  is  similar  to  the  second.  The  explana- 
tion of  the  sale  requires  three  lines.  The  debit  amount  must  always  be 
on  the  same  line  with  the  debit  account  and  the  credit  amount  on  the 
same  line  with  the  credit  account. 

POSTING 

Posting  is  transferring  the  debits  and  credits  from  the  books  of 
entry  under  the  proper  headings  in  the  ledger. 

To  Post  the  Journal.  First  Entry.  The  first  part  of  the  entry  is 
a  debit  to  Merchandise.     Post  it  as  follows: 


PAGE 

1 

>f~  1 

^~r 

/ 

.      / 

/ 

7  *~7 

f6 

The  second  part  is  a  credit  to  J.    C.    Braden's   account,  as  follows: 


/?- 


%v?  / 


/ 


PAGE  3 


/2-y  J~o 


26 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Second  Enthy.     The  first  part  is  a  debit  to  C.  D.  Hawks'  account, 
as  follows: 


f&d/ 


PAGE  4 

'9- 

%~ 

■■j- 

t 

/ 

J*4 

The  second  part  is  a  credit  to  Merchandise.     The  Merchandise  ac- 
count would  then  appear  as  follows: 


PAGE    1 

'1- 

/f- 

\ 

#* 

/ 

fi 

'  i 

/2-y 

So 

• 

S~ 

/ 

/ 

3* 

PAGE  2  t.  F.    account  To  Be  Credited  Cr 


T 


7S- 
S~o 


A^tz^Zy^i^c^c^    y-2^t*s*<*2szzsri^/ 


7 


\S* 


>/f  &  ys 


2~/yC  ys 


/¥zy 


IS 


PRINCIPLES  OP  DOUBLE  ENTRY  BOOKKEEPING 


27 


The  other  journal  entries  should  be  posted  in  the  same  way.  The 
page  in  the  folio  column  to  the  left  of  the  names  of  the  accounts  in 
the  journal  shows  how  much  of  the  journal  has  been  posted. 

A  cash  book  containing  receipts  and  payments  on  account,  pro- 
prietor's investment  and  withdrawals,  as  well  as  purchases  and  sales  of 
merchandise  for  cash,  and  payments  for  carrying  on  the  business  will 
now  be  shown.     (See  illustrations  below.) 

ANALYSIS  OP  CASH  BOOK  ENTRIES 

Cash  Receipts.  First  Entry.  Cash  is  understood  to  be  debited 
because  it  is  received.  C.  E.  Brooks'  account  is  credited  because  he 
yields  the  benefit  to  the  business  by  investing  cash. 

Second  Entry.  Cash  is  understood  to  be  debited  because  it  is  re- 
ceived.    Merchandise  is  credited  because  it  is  parted  with. 

Third  Entry.  Cash  is  understood  to  be  debited  because  it  is  re- 
ceived. Every  entry  on  the  Receipts  side  is  a  debit  to  Cash  because  it  is 
received. 

C.  D.  Braun's  account  is  credited  because  he  yields  a  benefit  to  the 
business  by  paying  on  account. 

Fourth  Entry.     Same  as  second. 

Fifth  Entry.  S.  G.  Garner's  account  is  credited  because  he  yields 
a  benefit  to  the  business  by  paying  all  of  his  account. 


PAGE  3 


/oo  — 


Z3~ 
3/ 


Jjr 


3/     /    ^s^dJLs-&^4y,     \Si6tr£**>£' 


yS-/ 


\/^^t^c^z^?^c^^- 


(Jk?^^ZsZZs7Z*zC~ 


y£<7,<S~o 


/¥2-7 


2/q&  J  J" 


28 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Cash  Payments.  First  Entry.  Expense  is  debited  because  the 
business  receives  the  benefit  of  the  use  of  the  store  room. 

Cash  is  understood  to  be  credited  because  it  is  parted  with. 

Second  Entry.  Merchandise  is  debited  because  it  is  received.  Cash 
is  understood  to  be  credited  because  it  is  parted  with.  Each  entry  on 
the  Payments  side  is  a  credit  to  cash. 

Third  Entry.  Expense  is  debited  because  the  business  receives 
the  office  books  for  use  in  carrying  on  the  business. 

Fourth  Entry.  H.  A.  Ewing's  account  is  debited  because  he  re- 
ceived the  benefit  of  the  payment. 

Fifth  Entry.  J.  E.  Gardner's  account  is  debited  because  he  received 
the  benefit  of  the  payment  to  him  of  the  invoice  bought  on  the  10th. 

Sixth  Entry.  C.  E.  Brooks'  account  is  debited  because  he  re- 
ceived the   benefit   of   the   money   withdrawn   for   personal   use. 

Seventh  Entry.  Expense  is  debited  because  the  business  received 
the   benefit   of   the   clerk's   services. 

TO  POST  THE  CASH  BOOK 
Cash  Receipts.     First  Entry. 


""£?>  (o,  "%2^^-^L 


PAGE   I 


Credit  each  other  account  for  the  amount  specified,  and  put  the 
page  of  the  ledger  in  the  folio  column  of  the  cash  book  to  the  left  of 
the  name  of  the  account. 

Since  each   entry  is  understood   to   be  a   debit   of  cash,   our   double 


PRINCIPLES  OP  DOUBLE  ENTRY  BOOKKEEPING 


29 


entry  principle  will  be  satisfied  if  we  post  but  one  debit  to  the  Cash  ac- 
count instead   of   five   separate   debits. 

Debit   Cash   for   the   total   $2,196.75   as   follows: 


» .  i . 

PAGE   1 

'f- 

M#>*7. 

3/ 

tf 

2- 

2-/f& 

7*~ 

Cash  Payments.     First  Entry. 


PAGE  2 


^^Z-^^Z^^d^ 


4 


3o 


Second  Entry.  The  posting  to  the  Merchandise  account,  together 
with  the  entry  already  posted  from  the  Cash  Receipts  would  appear  as 
follows: 


PAGE 

2 

*f- 

J9~ 

jfa 

4- 

<g 

3 

3Cy 

£/jr 

\U*7. 

/o 

•4 

% 

Cs 

J"0 

Debit  each  other  account  for  the  amount  specified  and  put  the  page 
of  the  ledger  in  the  folio  column  of  the  cash  book  to  the  left  of  the 
name  of  the  account. 

Since  each  entry  is  understood  to  be  a  credit  to  cash,  but  one 
credit   to   the   Cash   account   is   necessary   instead   of   seven   credits. 

Credit   Cash   for   the   total,    $769.50,    as   follows: 


PAGE    1 

/f- 

(3/ 

-4 

2- 

2-/f& 

7*~. 

3/ 

■€ 

3 

7^7 

sTO 

30 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Tj^z^^^/fc^^ 


Model 


PAGE     2  L.   F        ACCOUNT  TO    BE   CREDITED  " 


a^^y,  /&' 


iW 


/ 

// 
//*■ 

zs- 

3o 
3/ 

3/ 


ZvLd^eS. 


7s 

7^ 


/    ^/€i^dJL/~UsZy.  ^z^crfez^t/ 


7^d^L^y. 


A^^zz^^z^z^C-ey  iJ^yz^^T^iz^yi^y 


J-f \C.j- 


ZoZT-J'O 


2-OZ2- 


JTo 


/ofj'yo 


PRINCIPLES  OF  DOUBLE  ENTRY  BOOKKEEPING 


31 


Cash  Book 


L.  r       Account  Trf'Bt  Debited  £/ 


PAGE  3 


L/asns,  J  2- 
2 

c 
* 

/£ 

'7 

13 
3o 
3/ 
3/ 

3/ 


/      y?Pc£*L6S.  ^JAz^t^c^^^r^y      /3Ty 

,7S 


2-S- 


/2 


7s 

2o 
/  o 
2-3~ 


7^^-^tZ^7^<^d^ 


LJ^z^^i^z^yi^c{ 


23~3~0 


fjC 


fa 


/o 


LL'^ 


/-oZ2-  5~o 


32 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Model  Journal 


&^zy.  / ,  /#• 


PAGE    1 


4    "S^y^t^t^^y 


-^i^zz^d/^&z^L/ 


s^ZL^JL/,   $  /-5~o 


7 


^ry^t^r-t^^yyt^?^ 


t 


JfceU^s. 


2        *=/-z7-  ^.m0?J27as>i*tf  ^t^oc^Tr,  /  o^cCcu* 


3o-U£.  ^z^Aj     *  |r 
AT 

Zj  "v-*ts,    fer£aj£e>-£j yj- f  2-o. 
ZZ 

2J~ 

z£ 


z/r  fty 


/  ZiZ  3~a 


zCr 


C3 


// 


S'A 


2/f  jo 


/  2-V  3~o 


JS 


zC 


f  f<r 


7s 


&J  y^r 


^ 


///  ts~ 


J~iA    — 


//<»    44.  r 


//<*    <ZJ~ 


PRINCIPLES  OP  DOUBLE  ENTRY  BOOKKEEPING 


33 


Model  Ledger 


^fy/StrsCdsriS 


PAGE    1 


£*V. 


>.  7- 


7 

r 
/Jr 


C 

'A 

So 


■4 


/yX^^c^C^^^ 


i 


-6  3 

~&  3 

-/  3 
4  3 

^7  3 


¥9  - 


37 


J- 


/<r 


6  r  < 


"a 
//  % 

/   2.  J- 


-£'      * 


/  . 


JL*n 


7J 
7 


/ 


2<r 
/  X  2- 


2-o2-X^~<. 


Z< 


~~Vj^l 


"7- 


r 

// 
/> 

2-J- 
3/ 


t~e^?X^d-c/ 


J!**,. 


-€  2- 


<7  A 


■g   3 


/J~o 


/;•  2-J- 

/2-4 So 

6  J  ys 
f;  ys- 

■r  7  £    s-» 


$3  h  <to 


34 


PAGE  2 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Model  Ledgeb 


"7- 


Jkn 


it 


2-S 


.2-3 


/r 


■e 


$ 


■e 


£ 


-g.&9/& 


/  0  o 


/2-£/J~o 

/    7    f 


•JU,. 


ijfrsr?. 


7 

2-2- 


tZs&tzsLS 


2-/ 


JS—     &*?./J~ 


£>3  J^rJbr?.3o 


$ 


4 


fi 


4 


fa>t  £ 


I 


/<Tf 


2- 
//7 

3   J  U 


/2-tASo 


2-CffS- 


7  <*" 


&3  /^T 


//£ 


*AS 


PRINCIPLES  OP  DOUBLE  ENTRY  BOOKKEEPING  35 

SET  I 

Use  the  first  and  fourth  pages  of  a  sheet  of  journal  paper  as  a 
journal  and  the  second  and  third  pages  as  a  cash  book.  Enter  the  cash 
transactions  in   the   cash   book   and   all   others  in   the  journal. 

TRANSACTIONS    FOR   JANUARY 

January     1.     B.     N.     Baxter     began    business    by    investing    cash, 

$1,500. 
Make   a   memorandum   in   the     journal,    and   an   entry   in   the   cash 
book. 

2.  Paid  rent  of  store  for  one  month,  $25. 

3.  Bought  of  G.  E.  Bond,  for  cash: 

50  bbl.  Flour  at  $5.80 

4.  Bought  of  F.   S.   Norton,  on  account,   30  days: 

200  bu.  Potatoes  at  65f£ 
The  item  bought  should  not  be  recorded  in  the  journal  entry. 
6.     Sold  S.  E.  Curtis,  for  cash: 

25  bbl.   Flour  at  $6.05 
9.     Paid  for  bill  heads,  $2.50. 
12.     Sold  C.  E.   Niles,  on  account,   10  days: 
75  bu.  Potatoes  at  80^ 
Record  the  item  sold  in  the  journal  entry. 
16.     Sold  S.  E.  Lowe,  for  cash: 

50  bu.  Potatoes  at  82^ 
18.     Bought  of  B.   N.   Carr,  on  account: 

40  bbl.  Apples  at  $3.75 
22.     Paid  B.  N.   Carr  cash,  on  account,  $50. 
24.     Received  cash,    $60,    for    the    sale    to    C.  E.  Niles  on 
the  12th. 

26.  Sold  L.  S.  Stewart,  for  cash: 

25  bbl.  Flour  at  $6.40 

27.  Paid  F.  S.   Norton  cash,  on  account,  $80. 

28.  Sold  C.  E.   Niles,  on  account,  30  days: 

15  bbl.  Apples  at  $4.30 

29.  B.  N.  Baxter,  the    proprietor,    withdrew    $25  for  per- 

sonal use. 
Does  the  business  receive  cash  or  pay  it  out? 

31.     Paid  clerk's  salary  for  two  weeks  in  cash,  $15. 

CLOSING    WORK 

1.  Balance  the  cash  book. 

2.  Post   the   journal    entries    to    the   ledger.       Do    not    forget   that 
each  ledger  posting  must  show  the    date,  J,  the  page  of  the  journal,  and 


36  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

the  amount  The  letter  and  page  show  from  what  book  and  page  the 
entry  was  posted.  After  posting  the  debit  of  the  entry,  put  the  page 
of  the  ledger  to  which  the  entry  has  been  posted  in  the  folio  column 
of  the  journal  to  the  left  of  the  name  of  the  account.  Do  the  same 
thing  after  posting  the  credit  to  the  ledger. 
3.     Post    the    cash    book    as    follows: 

a)  Credit  each  account  named  on  the  receipts  side  of  the  cash  book. 
Put  C  and  the  page  of  the  cash  receipts  in  the  ledger  to  show  from 
what  book  and  page  each  entry  is  posted.  Put  the  page  of  the  ledger  to 
which  you  have  posted  in  the  folio  column  to  the  left  of  the  name  of 
each  account  in  the  cash  book. 

b)  Post  the  total  cash  received  for  the  month  to  the  debit  of  the 
Cash  account  in  the  ledger.  The  date  in  the  ledger  will  be  the  last 
day  of  the  month,  January  31.  Do  not  forget  to  place  C  and  the  page 
of  the  cash  receipts  in  the  ledger  account  nor  the  page  of  the  ledger  to 
which  you   have   posted   in   the  folio   column   of  the   cash   book. 

c)  Debit  each  account  named  on  the  payments  side  of  the  cash 
book.  Do  not  forget  to  place  C  and  the  page  of  the  cash  payments  for 
each  posting  and  the  page  of  the  ledger  in  the  folio  column  of  the  cash 
book. 

d)  Credit  the  Cash  account  for  the  total  cash  paid  out,  using  Jan- 
uary 31,  C,  the  page  of  the  cash  payments,  and  the  amount.  Put  the 
page  of  the  ledger  in  the  folio  column  of  the  cash  book. 

When  you  have  finished  posting,  present  your  journal,  cash  book 
and  ledger  to  your  teacher  for  approval. 

Keep  all  these  papers  until  Set  I  is  entirely  completed.  You  will 
study  the  other  steps  to  be  taken  in  the  succeeding  chapters  before  com- 
pleting Set  I. 

Note:  The  following  are  the  necessary  steps  for  each  set: 

1.  Make  the  entries. 

2.  Post  to  the  ledger. 

3.  Take  a  trial  balance. 

4.  Make  statements. 

5.  Close  the  ledger. 

6.  Make  a  proof  trial  balance. 


CHAPTER  V 
THE  TRIAL  BALANCE 


Double  entry  bookkeeping  provides  a  test  of  the  posting  to  the 
ledger.     That  test  is  the  Trial   Balance. 

In  making  entries  in  the  journal,  there  was  an  equal  credit  for 
every  debit.  The  debits  from  the  journal  have  been  posted  to  the  debit 
side  of  the  respective  accounts.  In  the  ledger  the  credits  from  the 
journal  have  been  posted  to  the  credit  side  of  the  respective  accounts. 

In  making  entries  in  the  cash  book  on  the  receipts  side,  Cash  was 
understood  to  be  debited  and  the  respective  accounts  named  were 
credited.  In  posting  to  the  ledger,  but  one  debit  to  Cash  was  posted 
for  the  sum  of  the  accounts  credited.  On  the  payments  side,  each 
account  named  was  posted  to  the  debit  side  and  Cash  was  credited  for 
the  total.  In  this  way  the  ledger  has  been  kept  in  equality.  The  sum 
of  the  debits  of  all  the  accounts  should  equal  the  sum  of  the  credits  of 
all  the  accounts. 

A  Trial  Balance  is  a  list  of  the  open  accounts  in  a  ledger  with  the 
debit  and  credit  footings,  or  the  balances  set  opposite  the  names  of  the 
accounts,   and  with  the  total  debits  and   credits  equal. 

Open  Accounts  are  those  accounts  that  do  not  have  the  same  total 
on  each  side  of  the  account.  If  an  account  shows  exactly  the  same 
total  on  each  side  of  the  ledger,  it  should  not  appear  in  the  trial  bal- 
ance, as  it  balances  or  is  closed.  The  accounts  should  be  listed  in  the 
order  that  they  occur  in  the  ledger  with  the  ledger  page  placed  to  the 
left    of    the    name    of    the    account. 

Preparations  for  the  Trial  Balance.  Before  a  trial  balance  is  made, 
the  following  steps  should  be  taken: 

1.  Without  drawing  any  lines,  add  the  debit  side  of  each  ac- 
count that  contains  more  than  one  item.  Place  the  footings  in  small, 
neat,  pencil  figures  underneath  the  line  on  which  the  last  item  is  entered. 

2.  In  the  same  way,  add  the  credit  side  of  each  account  that 
contains   more   than   one  item. 

3.  Examine  the  ledger  to  see  whether  any  accounts  foot  up  the 
same  on  each  side.  Such  accounts  should  be  omitted  from  the  trial 
balance. 

37 


38 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Trial  Balance  of  Totals.  The  simplest  method  of  making  a  trial 
balance  of  the  ledger  is  a  trial  balance  of  totals.  A  trial  balance  of 
the    totals    of    the    Model   Ledger  follows: 


**~/sL^zz^l/  /^^i^^i^yi^c^^,  Jdu 


a^^i^,  3/,  /j — 


2-o7-2>J~o     J3&  to 
/oo   —     33&  Jsf 
/yrs~o     /2.^J~o 


>7S- 


0S~3fJ~<?  fS 


It  will  be  noticed  that  all  the  accounts  in  the  ledger  are  listed  in 
the  trial  balance  except  that  of  S.   N.   Good,   which  balances. 

Value  of  the  Trial  Balance.  The  trial  balance  tests  the  equality 
of  the  debits  and  credits  of  the  ledger.  It  also  furnishes  information 
on  which  to  base  certain  statements  made  out  at  the  end  of  each 
financial  period. 

The  trial  balance  does  not  prove  the  absolute  correctness  of  the 
ledger.  It  does  not  prove  the  correctness  of  the  entries  in  the  original 
books.  A  sale  may  have  been  figured  out  incorrectly.  The  trial  balance 
does  not  show  this  mistake.  The  wrong  account  may  have  been  debited 
or  credited.  The  trial  balance  does  not  show  this.  A  debit  may  have 
been  posted  to  the  debit  side  of  the  wrong  account.  The  trial  balance 
does  not  show  the  bookkeeper  that  an  error  of  this  kind  has  been  made. 
In  your  practice  work  you  may  obtain  a  trial  balance  of  your  ledger 
and  yet  find  that  some  mistakes  have  been  made  which  the  trial  bal- 
ance does  not  test. 

Trial  Balance  of  Differences.  The  trial  balance  of  totals  already 
explained  is  the  easiest  one  for  the  beginner  to  understand  but  is  not 
used   as   much   as   a   trial  balance  of  differences. 

A  ledger  in  balance  is  an  equation.     The  same  amount  may  be  sub- 


THE  TRIAL  BALANCE 


39 


tracted  from  each  side  of  an  account  in  the  trial  balance  and  it  will 
not  alter  the  equality  of  the  trial  balance.  For  example,  if  $40  be 
subtracted  from  each  side  of  S.  N.  Boden's  account  in  the  trial  bal- 
ance of  totals,  nothing  would  remain  on  the  debit  side  and  $1,460 
would  be  left  on  the  credit  side.  This  is,  in  effect,  subtracting  the 
smaller  from  the  larger  side  of  the  account.  In  the  trial  balance  of 
differences,   this  difference    is  placed  on  the  side  that  is  the  larger. 

The ,  trial   balance   of   totals   when   taken   as   a   trial   balance   of   dif- 
ferences would  appear  as  follows: 


J ^X^^^c?/, /^ 


J-i/ 


yf°7 


'*4< 


zjC 


7^ 


J3   f<J~ 


/J-  /foj  /jr 


How  to  Find  Errors  in  a  Trial  Balance.     If  a  trial  balance  does 
not  add  up  the  same  on  each   side,   some  error  must  have  been  made. 
It   may   have   been   made: 

1.  In  posting  to  the  ledger. 

2.  In  adding  or  subtracting  in  the  ledger  or  in  the  trial  balance. 

3.  In   transferring   amounts   from   the   ledger   to   the   trial   balance. 

4.  In  the  omission  of  one  or  more  open  accounts  from  the  trial 
balance. 

To  find  the  mistake: 

1.  Add  each  side  of  the  trial  balance  and  find  the  difference. 

2.  If  the  difference  is  10^  or  a  multiple  of  it,  the  mistake  is 
usually  an  error  in  addition  or  subtraction  either  in  the  trial  balance 
or  in  the  ledger.  Prove  subtraction  by  addition.  Prove  addition  by 
adding  the  reverse  way. 


40 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


3.     The  difference  may  be  due  to  a  failure  to  post  an  amount, 
find   the   mistake,   look  for  the  amount  in  the  books   of  entry. 


To 


4.  If  the  difference  is  divisible  by  two,  it  may  be  that  an  amount 
has  been  posted  to  the  wrong  side  of  the  account.  Divide  the  dif- 
ference by  two  and  look  for  the  quotient  in  the  books  of  entry  or  in 
the  ledger. 

5.  If  the  difference  is  divisible  by  9,  there  is  a  strong  probability 
that  the  error  has  been  caused  by  a  transposition  of  figures,  as  $57 
posted  instead  of  $#75,  or  a  "slide,"  as  75j£  posted  as  $75.  The 
figures  transposed  may  be  found  by  taking  the  difference  and  dividing 
it  by  9.  The  quotient  represents  the  difference  between  the  digits 
transposed.  For  example,  suppose  the  difference  in  the  trial  balance 
is  $54.  $54  divided  by  9  gives  6.  That  quotient  is  the  difference 
between  the  digits  transposed.  It  may  be  a  transposition  of  9  and  3, 
of  8  and  2,   of  7  and  1,  of  6  and  0. 

Checking  the  Posting.  If  these  devices  fail,  the  posting  of  the 
books  should  be  checked.  This  is  done  by  using  a  sharp  pencil  and 
putting  a  small,  light  pencil  mark  (V)  on  the  double  line  to  the  left 
of  the  amount  in  the  ledger  and  on  the  double  line  to  the  left  of  the 
amount  in  the  book  of  entry.  In  checking  the  journal,  take  all  the 
debits  first,   then  all  the  credits. 

From  the  cash   book   the   checking  would   be  as  follows: 


&^zy.  /f 


Jlzxn/. 


/ 


■Q7.  /f.  J&v-?d^?^^kJ^  o 


J2^.  7f.^Gz?^U^y 


*f- 


.  / 


■€ 


2-S 


/yfOO 


THE  TRIAL  BALANCE 
From   the   journal,    check   as  follows: 


41 


/ 


7 


<7-ri^     /  2-/<T  J 


/  >/r  vo 


r 


'9- 


$*«•  7 


7 


/ 


/  S  2-/ttfo 


SET  I  (Continued) 

Foot  each  side  of  each  account  in  the  ledger,  if  the  side  contains 
more  than  one  item.  Place  the  footings  in  small  pencil  figures  under- 
neath the  line  on  which  the  last  item  on  that  side  is  entered. 

Make  a  trial  balance  of  totals  of  the  ledger.  Submit  it  for  ap- 
proval. 

Copy  the  journal,  cash  book,  ledger,  and  trial  balance  in  the  blank 
books.     Keep    the    manuscript    ledger    for    further    use. 

SET  II    , 

TRANSACTIONS    FOR    FEBRUARY 

1.  Enter  each  of  the  following  transactions  in  the  cash  book  or  in 
the  journal. 

2.  Balance  the  cash  book. 

3.  Post  the  journal  and  the  cash  book  to  the  ledger. 

4.  Take  a  trial  balance  of  totals. 

5.  Present  all  papers  to  the  teacher  for  approval. 

6.  Copy  the  journal,  cash  book,  ledger,  and  trial  balance  in  the 
blank  books.     Keep  the  manuscript  ledger  for  further  use. 


42  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

February   1.     B.    D.    Tower    began   a   coal    and    wood    business    by 
investing  cash,  $2,500. 

2.  Paid    S.    N.    White    for    rent    of    store    to    March    1, 

$30. 

3.  Bought  of  H.  A.  Baxter,  for  cash: 

50  tons  hard  coal  at  $7.35 

4.  Paid   for   an    advertisement   in    a   local   paper,    $3.50. 

5.  Bought  of  D.  Jenkins,   on  account: 

75  tons  soft  coal  at  $2.85 

6.  Sold    C.    S.   Oliver,  for    cash: 

20  tons  hard  coal  at  $8.15 

8.  Sold  D.  E.   Martin,  on  account,   15  days: 

30  tons  soft  coal  at  $3.50 

9.  Bought  of   G.   H.   Franke,   on  account,    15  days: 

125  tons  coke  at  $5.35 

10.  Paid    bill   for   printing   bills   and   letter   heads,    $3.75. 

11.  Paid    D.   Jenkins   cash   on   account,    $125. 

12.  Sold  N.  Maas,  for  cash: 

15  tons  soft  coal  at  $3.45 

13.  Sold   D.   Fox,   on  account: 

40  tons  coke  at  $5.75 

15.  Bought  of  D.  Jenkins,   on  account,   20  days: 

50   tons   soft   coal   at   $2.80 

16.  Sold  J.   O.   Bauer,   on  account: 

65  tons  coke  at  $5.80 

17.  Paid  D.  Jenkins  cash,  on  account,  $50. 

18.  Received   cash   of   D.    Fox,    on   account,    $150. 

19.  Sold   D.   E.    Martin,   on  account,   30  days: 

15  tons  hard  coal  at  $7.50 

20.  Paid   G.    H.   Franke   cash,   on   account,    $200. 

22.  Bought   of   H.    A.    Baxter,    for   cash: 

25  tons  hard  coal  at  $7.40 

23.  Received  cash  of  D.  E.  Martin,  for  invoice  of  the  8th, 

$105. 

24.  Paid   G.    H.   Franke  cash,   on  account,   for  balance  of 

invoice   of   the   9th,    $468.75. 

25.  Received   cash   of   J.    O.    Bauer,    on   account,    $200. 

26.  Sold   D.   Fox,   on  account,    10   days: 

40  tons  hard  coal  at  $8.10 
20  tons  soft  coal  at  $3.45 
(Have  you  shown  the  extension  of  each  item  sold  in  the  explana- 
tion in  the  journal?) 

27.  Paid    clerk's   salary   for    two    weeks   in    cash,    $15. 
27.     Paid    the   City   Teaming   Co.    $25  for   making    deliv- 
eries  for  the  business. 


CHAPTER  VI 
ACCOUNTS   CLASSIFIED 


Accounts  may  be  divided  into  real,  nominal  and  mixed. 

Real   Accounts    are   accounts   that   represent   actual    values. 

Real  Accounts    are   either   personal   or   property. 

Personal  Accounts  are  accounts  with  individuals,  partnerships  and 
corporations. 

Property  Accounts  are  accounts  kept  to  show  the  value  of  property 
belonging  to  the  business;  as,  cash,  accounts  with  notes,  land,  buildings, 
horses,  wagons,  office  fixtures,  machinery,  etc. 

Nominal  Accounts  are  accounts  that  name  some  profit  or  loss  of 
the  business.  They  are  frequently  called  profit  and  loss  accounts.  The 
only  one  studied  so  far  has  been  the  expense  account.  In  more  ad- 
vanced bookkeeping,  the  expense  account  may  be  divided  into  several 
accounts,  and  many  ot^ier  accounts  may  be  kept,  such  as,  freight, 
commission,    interest,    discount,   etc. 

Mixed  Accounts  are  accounts  that  contain  both  real  and  nominal 
elements.  The  Merchandise  account  is  the  best  example  of  a  mixed 
account. 

All  real   accounts   show   an  asset  or   a  liability. 

An  Asset  is  property  belonging  to  the  business  or  an  amount  owed  to 
the  business. 

A  Liability  is  an  amount  owed  by  the  business,  whether  due  or  not. 

Rule  for  Real  Accounts.  Real  accounts  with  the  debit  side  the 
larger   are   assets;     with   the   credit   side   the   larger   are   liabilities. 

A  personal  account  must  first  be  examined  to  see  whether  the  ac- 
count is  that  of  a  customer — one  to  whom  the  business  has  sold,  or  that 
of  a  creditor — one   from   whom   the   business   has   bought. 

The  debit  side  of  a  customer's  account  is  usually  the  larger  because 
the  debit  side  represents  sales  to  him  and  the  credit  side  represents  pay- 
ments or  allowances  on  goods.     It  should  show  an  asset. 

The  credit  side  of  a  creditor's  account  is  usually  the  larger  because 
the  credit  side  represents  purchases  from  him  and  the  debit  side  repre- 
sents payments  made  to  him  or  allowances  given  the  business  on  goods. 
It    should    show    a    liability. 

43 


44  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Property  accounts  are  usually  named  in  such  a  way  as  to  indicate 
the   nature   of   the   asset   or   liability. 

Rule  for  Nominal  Accounts.  A  nominal  account  shows  a  loss  if 
the  debit  side  is  the  larger  and  a  profit  if  the  credit  side  is  the  larger. 

The  expense  account  is  a  nominal  account  that  always  shows  a 
loss,  as  it  represents  money  paid  out  for  carrying  on  the  business.  If  there 
is  anything  of  value  unused,  it  is  a  mixed  account  and  also  shows  an  asset. 

The  Merchandise  Account,  A  Nominal  Account.  The  merchandise 
account  is  debited  for  the  goods  bought  and  credited  for  the  goods  sold. 
If  all  the  goods  have  been  sold,  the  Merchandise  account  shows  a  profit 
if  the  credit  side  is  the  larger  and  a  loss  if  the  debit  side  is  the  larger. 

The  Merchandise  Account,  A  Mixed  Account.  In  any  continuous 
business,  some  goods  are  left  on  hand  at  the  end  of  the  period  for  which 
the  profit  or  loss  on  merchandise  is  to  be  found.  These  goods  on  hand 
are  called  the  inventory  of  merchandise.  That  makes  the  merchandise 
account  a  mixed  account. 

Inventory  of  Merchandise.  The  Inventory  of  Merchandise  may  be 
found  by  taking  inventory  or  taking  stock.  The  merchandise  on 
hand  is  listed  on  cards,  or  loose-leaf  sheets,  or  in  a  book.  It  is  then 
computed  at  the  cost  price,  if  it  is  in  a  good  salable  condition.  If  the 
goods  are  shopworn,  out  of  season,  out  of  style  or  for  some  other  reason 
will  sell  for  less  than  cost,  they  should  be  computed  at  the  present 
value. 

The  inventory  may  be  found,  in  most  businesses  by  keeping  a  per- 
petual inventory  book,  which  shows  the  merchandise  of  each  kind  pur- 
chased, sold,  and  the  balance  on  hand. 

The  inventory  is  the  real  element  in  the  merchandise  account. 
It  is  property.  It  is  an  asset.  The  nominal  or  profit  and  loss  element 
must  be  found. 

How  to  Find  the  Profit  or  Loss  on  Merchandise.  There  are  two 
methods  of  finding  the  nominal  element,  the  profit  or  loss  on  mer- 
chandise. By  one  method,  the  inventory  is  subtracted  from  the  debit 
side,  which  is  the  cost  of  all  the  goods.  The  difference  is  the  cost  of 
the  goods  sold.  This  result  is  subtracted  from  the  credit  side,  which 
is  the  value  of  the  goods  sold.  The  difference  is  the  profit 
on  Merchandise.  If  the  cost  of  the  goods  sold  is  greater  than  the 
selling  price,   the  result  is   the  loss   on   merchandise. 

Expressed   in   brief   form,   it   would    be: 
Credit— (Debit— Inventory)=Profit,  or, 
(Debit — Inventory)  —  Credit=Loss. 

The  account  method  is  another  method  very  commonly  used,  be- 
cause it  is  easier  to  show  addition  in  the  ledger  accounts  than  sub- 
traction. By  this  method,  the  inventory  is  added  to  the  value  of  the 
goods  sold.  From  this  result,  the  debit  is  subtracted.  The  differ- 
ence is  a  profit.     Or,  if  the  debit  is  the  larger,  the  difference  is  a  loss. 


ACCOUNTS  CLASSIFIED  45 

Expressed   as    a   formula,    it    would    be: 
Credit+ Inventory—  Debit=  Profit,  or, 
Debit—  (Credit+  Inventory)  =  Loss. 
The   trial   balance   of   the    Model   Ledger   will   now  be  analyzed  and 
the  accounts  classified. 

Analysis  of  Model  Ledger.  S.  N.  Boden's  account  is  debited  for 
the  money  withdrawn  from  the  business  and  credited  for  his  invest- 
ment. It  is  a  real  account  and  shows  a  liability  of  the  business 
to   the  proprietor. 

Merchandise  account  is  debited  for  the  goods  bought  and  credited 
for  the  goods  sold.  Before  ascertaining  what  the  account  shows,  an 
inventory  must  be  taken.  The  inventory  value  is  taken  to  be  $809.25. 
The  account  is  a  mixed  account  and  the  nominal  or  profit  and  loss 
element  must  be  found. 
First   Method: 

Merchandise  Debit,  cost  of  all  the  goods $1255.00 

Merchandise  Inventory 809 .  25 

Cost  of  goods  sold $  445.75 

Merchandise  Credit,  selling  price $  576 .  50 

Cost  of  goods  sold •.  .      445.75 

Merchandise  Profit $  130.75 

Second  Method: 

Merchandise  Credit,  selling  price $  576 .  50 

Merchandise  Inventory 809  .  25 

Merchandise  Value $1385.75 

Merchandise  Debit,  cost  of  all  the  goods $1255.00 

Merchandise  Profit $  130.75 

The  account,  then,  shows  a  profit  of  $130.75  and  a  real  element, 
the  inventory,  of  $809.25. 

Expense  is  debited  for  anything  paid  out  to  carry  on  the  business. 
It    is    a    nominal    account    and    shows    a    loss. 

Cash  is  debited  for  the  cash  received  and  credited  for  the  cash  paid 
out.     It  is  a  real  account  and  shows  an  asset. 

B.  D.  Foley's  account  is  credited  for  the  value  of  the  goods  bought 
of  him  on  account  and  debited  for  the  amount  paid  by  the  business  on 
account.     It    is    a    real    account    and    shows    a    liability. 

C.  S.  Baxter's  account  is  debited  for  the  value  of  the  goods  sold 
him  on  account  and  credited  for  the  amount  received  from  him  on  ac- 
count.    It  is  a  real   account   and   shows   an   asset. 

T.  A.   Carr's  account  is  analyzed  the  same  as  B.   D.  Foley's. 

C.  D.  Sand's  account  is  credited  for  the  value  of  the  goods  bought 
of  him  on  account.  Nothing  has  been  paid  on  it.  It  is  a  real  account 
and  shows  a  liability. 


46  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Exercise  8.  First,  as  an  oral  exercise  analyze  the  trial  balance  of 
Set  I.  Use  $142.50  as  the  inventory  of  goods  on  hand.  Then,  write 
out  your  analysis  of  each  account  in  the  trial  balance.  The  analysis 
should  state  the  reason  for  the  debit  and  for  the  credit,  classify  the 
account,  and  state  what  the  account  shows. 

Exercise  9.  Analyze  in  writing  the  trial  balance  of  Set  II.  Use 
$275   as   the   inventory   of   goods   on   hand. 

Exercise  10.  Find  the  profit  or  loss  on  merchandise.  Your  teacher 
will  direct  you  as  to  which  method  to  use. 

a)  The  debit  side  of  Merchandise  is  $896.40;  the  credit  side  is 
$975.50.     All   the   goods   have   been   sold. 

b)  Merchandise  Debit,  $1275.15;  Merchandise  Credit,  $926.35;  In- 
ventory, $389.25. 

c)  Merchandise  Debit,  $726.45;  Merchandise  Credit,  $801.50;  In- 
ventory, $45.60. 

d)  Merchandise  Debit,  $647.55;  Merchandise  Credit,  $501.95;  In- 
ventory, $110.40. 

Exercise  11.  Review.  Enter  the  following  transactions  in  the 
proper  books.  Use  one  page  as  a  journal  and  two  opposite  pages  as  a 
cash  book. 

December   1.     C.  S.  Hunter  invests  $1500  cash  in  the  business. 
3.     Paid  $20  for  rent  of  store. 
5.     Bought  an  invoice  of  merchandise  of  S.  G.  Porth,  for 

cash,  $217.25. 
7.     Bought  an  invoice  of  merchandise  of  G.  E.  Leeds,  on 

account,  $167.45. 
9.     Sold   an   invoice   of   merchandise   to    D.    C.  Hart,  on 

account,  $93.75. 

12.  Paid  $5.75  for  one  ton  of  coal. 

13.  Sold  an  invoice  of  merchandise  to   B.   E.   Brand,   on 

account,  $82.15. 

15.  Paid   G.   E.    Leeds,   on  account,   $125. 

16.  Received   $60   of   B.    E.    Brand,   on   account. 

17.  Bought  an  invoice  of  goods  of  D.  A.   Carson,  on  ac- 

count, $212.35. 
20.     Received   of   D.    C.    Hart,    on   account,    $75. 
22.     Paid  G.   E.   Leeds,   the  balance  of  the  invoice  of  the 

7th,  $42.45. 
24.     Sold  an  invoice  of  merchandise  to  C.  G.  Gorman,  for 

cash,  $'65.50. 


ACCOUNTS  CLASSIFIED  47 

26.  Paid    D.    A.    Carson,    on    account,    $80. 

27.  Sold   an   invoice   of   merchandise   to    D.    C.    Hart,    on 

account,  $115.75. 

28.  Received  of  B.  E.  Brand  the  balance  of  his  account, 

$22.15. 
31.     Paid  clerk's  salary, 
Inventory  of  Merchandise,  $263.25. 
Balance  the  cash  book. 
Post  the  journal. 
Post  the  cash  book. 
Take  a  trial  balance  of  the  ledger. 


CHAPTER  VII 
STATEMENTS 


At  the  end  of  certain  regular  periods,  statements  are  made  out  to 
exhibit  the  profits  and  the  losses,  the  assets  and  the  liabilities,  and  the 
present  condition  of  the  business.  In  most  businesses  these  statements 
are  made  out  annually  at  the  end  of  the  business  year.     In  many  they 


ACCOUNT 


Ocbit  Credit  Losses 


Profits  Asscts 


44?  /S~o  o  — 

/2SS~    S~y£So 

Z-oT-ZSb  f3Cto 

/oo —  33&ys~ 

^^^7$U<Jz^^      /ytSo  /Z*£so 

^.Cs{r&&sL^/  /ys—  Z^JtfJj' 


/3oyS 


3  tSJ  yS3fSf  fJ~     tffyS  /3  o  ys-/f/fy 


/ofsy 


J-t/- 


Z3Cys 

y3  ys 


w  z/^y/S 


t£/to 


Ofa 


48 


/3ty^-  /3c 2^ 


-_£ 


J- 


/ft/ffJ 


/S~o  /  fo 
-/ytfffj- 


STATEMENTS  49 

are  made  out  semi-annually,  in  not  a  few,  quarterly,  and  in  a  few, 
monthly.  In  practice  work  for  the  learner,  they  are  frequently  made 
out  monthly  to  give  valuable  practice  in  classifying  accounts  and  in 
ascertaining    the    worth    of    the    business. 

Preparation  for  the  Statements.  Before  statements  can  be  pre- 
pared   the   following   steps    must    be   taken: 

1.  A    trial    balance    must    be    made. 

2.  Inventories   of  anything  of  value  on  hand   must  be  taken. 
The    Six-Column   Statement.      Different   forms    of    statements    are 

used  by  bookkeepers  and  accountants.  The  easiest  one  to  under- 
stand is  the  Six-Column  Statement.  It  exhibits  in  parallel  columns 
the  debits  and  credits  of  the  trial  balance,  the  losses  and  the  profits, 
and   the   assets   and   the   liabilities. 

Using  as  an  inventory  of  the  goods  on  hand,  $809.25,  a  Six-Column 
Statement  of  the  trial  balance   of  the  Model  Ledger  is  shown  on  page  48. 

The  proprietor's  net  credit  is  found  by  subtracting  his  withdrawals 
from  his  investment.     The  net  worth  of  the  business  is  found  in  two  ways: 

1.  By   adding    the    net    profit    to    the    net   credit    or    by  subtract- 
ing  the   net   loss   from   the   net   credit. 

2.  By  subtracting  the  liabilities  from  the  assets. 

The  proof  of  the  statement,  then,  is  whether  the  net  worth  found 
by  the  two  methods  is  the  same.  The  net  worth  is  placed  in  the  lia- 
bility column,  at  the  last,  to  show  that  the  statement  proves  and  to 
show  that  it  is  a  capital  liability,  a  liability  to  the  proprietor  for  what 
he   left   in   the   business   plus   the   net   profit   of   the   business. 

Most  business  houses  prefer  to  show  the  results  of  the  business  in 
two  statements,  a  Statement  of  Profit  and  Loss  and  a  Statement  of 
Assets  and  Liabilities.  The  statements  illustrated  on  pages  50  and  51 
are  made  from  the  trial  balance  of  the  Model  Ledger  and  the  inventory 
of  goods  on   hand,  $809.25. 

By  comparing  these  statements  with  those  of  the  Six-Column  State- 
ment, it  will  be  found  that  the  results  are  the  same.  These  statements 
show  how  the  results  are  obtained  in  greater  detail  than  the  Six-Column 
Statement,  and  for  that  reason  they  are  preferred  by  most  bookkeepers 
and  business  men.  You  will  use  the  Six-Column  Statement  at  first  to 
help  you  understand  the  classification,  then  you  will  use  the  Statement 
of  Profit  and  Loss  and  the  Statement  of   Assets  and  Liabilities. 

The  first  column  of  these  statements  should  be  used  when  there  is 
more  than  one  item  under  any  of  the  headings.  In  this  statement, 
Merchandise  is  the  only  account  that  shows  a  profit,  and  Expense  the 
only  account  that  shows  a  loss.  For  that  reason,  the  last  column  only 
is    used    in    this    Profit    and    Loss    Statement. 

Exercise  12.  From  the  following  Trial  Balance  and  Inventory,  make 
a  Six-Column  Statement: 


50 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


>^^^-Z5^<^^^^<^--<^7^-/ 


'~4s>%^C4sri*'-0    Il&sVI^S.  J?  /,  /0 


Sy6.so 


&stt4^r--'&~£'  a^r-z>-z£<J '-<£&-&/  //i/.j-,ys 


/(Lc^-  y^^tr^t^~ 


'/ 


Th^L^O 


4VJ 


a/ 


fo 


TRIAL  BALANCE,  OCTOBER  31,  19  — 

M.'N.  Sears $     75.00 

Merchandise 1247.25 

Expense 67.50 

Cash 2172.85 

C.   N.  Brady 216.40 

S.  B.  Carter 125.00 

C.  E.  Barton 

D.  G.  Cameron 118.50 


/Jo 


f<r 


v/ 


7^ 


fs 


ro 


/j~o/  fo 


$1750.00 
875.45 

845.40 
75.00 

318.25 
72.40 
86.00 


Merchandise  inventory,  $490.75.  $4022.50       $4022.50 

Set  I.     Make   a   Six-Column   Statement   for   Set   I,   and  keep  it  for 
future    use.     The   inventory   of   merchandise   is   as   follows: 

25  bbl.  Apples  at  $3.75 $  93.75 

75  bu.  Potatoes  at  65j£ 48 . 75  $142.50 


STATEMENTS 


51 


f&  J 


7 


2-3  d 


X< 


7- 


/f¥f..fsr 


t£4 


7 


/J~o/ 


/s- 


Copy  the  inventory  after  the  journal  entries  like  the  following: 


'A(a*vs.  3/,  /f — 


3  ^t^r?^d^~^^p-rz^y 


*//  — 


3.rs-      14  &  2- 


4.fJ~ 


fjiXo 


/t/j-j- 


Do  not  copy  the  Six-Column  Statement. 

Set  II.     Make  a  Six-Column  Statement  for  Set  II,  and  keep  it  for 
further  use.     The  inventory  of  merchandise  is   as  follows: 

60  tons  Soft  Coal  at  $2.80 $168 

20  tons  Coke  at  $5.35 107  $275 

Copy  the  inventory  after  the  journal  entries. 


CHAPTER  VIII 
CLOSING  THE  LEDGER 


The  statements  explained  in  the  last  chapter  were  made  from  a 
trial  balance  of  the  ledger  and  the  inventory  of  goods  on  hand.  They 
are  usually  kept  for  reference  in  a  statement  book. 

The  ledger  must  then  be  closed  to  show  the  net  results  of  the 
business  in  permanent  form. 

In  closing  the  ledger,  all  nominal  accounts  and  the  nominal  element 
of  all  mixed  accounts  must  be  transferred  to  a  Profit  and  Loss  account. 
This  Profit  and  Loss  account  corresponds  to  the  Profit  and  Loss  columns 
of  the  Six-Column  Statement  or  to  the  Statement  of  Profit  and.  Loss. 
The  net  result  of  that  account  must  be  the  same  as  the  net  profit 
of  the  statement. 

All  real  accounts  must  be  closed  by  Balance  to  show  the  same 
results  as  those  found  in  the  Asset  and  Liability  columns  of  the  Six- 
Column  Statement  or  in  the  Statement  of  Assets  and  Liabilities. 

Steps  Necessary.  Before  the  ledger  is  closed  the  following  steps 
should  be  taken:  . 

1.  Take  a  trial  balance. 

2.  Ascertain  the  inventories. 

3.  Make  a  Six-Column  Statement  or  a  Statement  of  Profit  and 
Loss. 

4.  It  is  desirable,  but  not  absolutely  necessary,  to  make  a  State- 
ment   of    Assets    and    Liabilities    before   closing    the   ledger. 

The  Model  Ledger  will  now  be  closed,  using  the  statements  already 
made  as  guides. 

To  Close  the  Merchandise  Account: 

1.  Enter  the  Inventory,  $809.25,  in  red  ink  on  the  credit  side. 

2.  Find  the  sum  of  the  credit  side  and  the  inventory,  and  place 
the  amount  in  pencil. 

3.  Subtract  the  sum  of  the  debit  side  from  the  sum  of  the  credit 
side  and  the  inventory. 

4.  Enter  the  difference,  $130.75,  on  the  debit  side  as  Profit  and 
Loss. 

5.  Rule  a  single  line  underneath  the  last  item  on  the  credit  side 

52 


CLOSING  THE  LEDGER 


53 


and  on  the  same  line  on  the  debit  side.  Place  the  totals  below  in  black 
ink  and  rule  double  lines  on  the  first  line  below  the  single  line.  The 
single  lines  should   be  ruled  across  the   money  columns   only,   thus, 


The   double   lines   should    be   ruled    across   all   but    the   explanatory 
columns,  thus, 


In  closing  this  account,  $809.25  has  been  added  to  the  credit  side 
and  $130.75  to  the  debit  side.  The  ledger  is  not  now  in  balance.  To 
put  it  in  balance,  $809.25  must  be  added  to  the  debit  side  of  the  ledger, 
and  $130.75  to  the  credit  side,   as  explained  below. 

6.  Bring  the  inventory  down  in  black  ink  on  the  debit  side,  dating 
it  February  1. 

7.  Transfer  the  Profit  and  Loss  item  to  the  credit  side  of  the 
Profit  and  Loss  account,  writing  January  31,  Merchandise,  $180.75. 
The    ledger    is    now    in    balance    again. 


PAGE    1 


/? — 

/<7 — 

1        II              1 

ytasrv.   2- 

C/3 

3  7SI7S 

Qrt^u 

a- 

&    X          /  7  2S 

7 

/  ' 

%  /  1 

cfO 

1 

(2  j  /       /  zu  so 

r 

Qs  3 

j  S7  /  o 

// 

&    X           J2/S- 

/S 

f  ' 

2  I  f  <f  S 

't 

Q    /         CS7S 

• 

22 

/' 

/  J  7 

rr 

/T 

<2s  x     /  ou  us 

2t 

/ 

/ 

/  /  i 

i  x  s  y 

US 

o    o 

2S 

/H  sjt 

3/ 

~^3i^er^is/-  Y^&LJ 

2- 

/  3o 

7* 

23 

Gs   %  ■       t  /  7S 

3/ 

<Z>    2- 

St 

s  7   I 

,?/ 

<^l^7sl/-esrtPC&/ls7f-- 

%  OCf 

IS 

IzJ^TsTS-^^lXZyisTf 

/  3  $3 

7S 

/3?S 

7S 

£l&> 

/ 

toy 

2-S 

54 


PAGE  2 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


7W- 


Qasrv.3/    2??60U^ 


/ 


/So  7S 


To  Close  the  Expense  Account: 

1.  Enter  January   SI,    Profit  and   Loss,    $88.95,    on   the  credit  side 

in  red  ink. 

2.  Rule  the  account  with  the  single  and  double  lines  on  the  same 
lines    of    the   debit    and    credit    sides. 

Is  the  ledger  in  balance? 

3.  Transfer  the  loss  to  the  debit  side  of  the  Profit  and   Loss  ac- 
count  in   black   ink,    writing   January   31,   Expense  $88.95. 


PAGE   1 


^y<Z^^€^rL^£^^ 


M 

-€  3 
■€3 

I'         1 
2-S  — 

/2-  2-0' 
/  2-  2~f 

3/ 

Z- 

ft 

?j 

'7 

3o 

-4 

J 
J 

/4 
IS 

\r<? 

• 

<tf 

#s 

ft 

<?s 

-f — 



The  Profit  and  Loss  account  would  then  contain  one  item  on  the 
debit  side  and   one  on  the  credit  side. 


PAGE  2 


iQ^l^y-^^yt 


'9- 


Ua*?.3/   (o/&fz~esri^<Les' 


/ 


/3  oys 


To  Close  the  Profit  and  Loss  Account: 

1.     Find   the  difference  between  the  credit   and   debit  sides   of  the 
account. 


CLOSING  THE  LEDGER 


55 


2.  Enter   this   difference,   $^1.80,   on   the   debit   side  in   red  ink    as 
S.  N.  B's  Net  Profit. 

3.  Rule  the  account. 

4.  Transfer   the   Net   Profit   to   the   credit   side   of   S.    N.    Boden's 
account   as   follows:    January  81,  Profit  and  Loss,  $^1.80. 


PAGE  2 


^^t^U-^^^^d^ 


<?- 


J£A 


/3  o 


£2l 


7 


-jt 


/Jo  y^r 


/3o 


7- 


The  Proprietor's  account  would  then  show  the  investment  and  the 
net  profit  on  the  credit  side  and  the  withdrawal  on  the  debit  side. 


PAGE  1 

'<r— 

1 

\"- 

1                  1 

Jk*>*r»3/ 

~&  3       *£o 

— JUrr.  /                                ~& 

Z 

/Soo 

— 

3/ 

~1^U^i^~f^^Uf 

2- 

<*/. 

fo 

To  Close  the  Proprietor's  Account: 

1.  Add   the   credit  side  and   the   net  profit  in   pencil. 

2.  Subtract  the    debit    side    from    it.     The    difference    is    the   Net 
Worth. 

3.  Enter  on  the  debit   side    in    red    ink,    January    31,    Net    Worth, 

$1501.80. 

'  4.     Rule  the  account. 

5.     Restore  the  ledger  to  balance  by  bringing  the  Net  Worth  below 
the  lines  on  the  credit  side,    February   1,  Net   Worth,  $1501.80. 


56 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


PAGE1 


J, 


-4   3 


9U+%crlMs 


¥0 


-JU. 


/SVJ 


to 


In 


3/ 


oSX 


if   2 


2 


/Soo  — 
V/V<2 


/.S¥/  <fo 


/So/  to 


This  completes  the  closing  of  the  nominal  and  mixed  accounts,  the 
Profit  and  Loss  account,  and  the  Proprietor's  account. 
To  Close  the  Cash  Account: 

1.  Find   the   difference  between   the  debit   and   credit  sides   of   the 
account. 

2.  Enter   this   difference  in  red  ink   on   the   credit  side   as  follows: 
January  31,  Balance,  $1085.70. 

3.  Add    each    side    and    rule    the    account. 

4.  Bring  the  Balance  down  on  the  debit  side  in  black  ink,  dating 
it  February  1. 


jh*' 


3&t 


A^zJ^z^T^c-^y 


'9- 

3 

>0>7- 

r°l 

2a^7. 

3/ 

3  / 

2o22 

ro 

/opj- 

7° 

4 


J3(2  to 

/  O  t^-yn 


7-OZ2- 


So 


To  Close  the  Personal  Accounts  that  Do  Not  Balance: 

1.  Find    the   difference    between    the    two   sides    of    the    account. 

2.  Enter   the   difference    as  Balance  on  the  smaller  side  in  red  ink. 

3.  Add  and  rule  the  account. 

4.  Transfer   the   Balance   to    the    opposite   side   of   the   account  in 
black  ink,  dating  it  February  1. 

B.    D.   Foley's  account   would   be   closed   as  follows: 


CLOSING  THE  LEDGER 


57 


*9 


(/asKS 


>/l 


3/ 


A^Z^C^i^>Z^C^^ 


/  o  o 


7-3  (a 


33 


—  Jkzsns 


£ 


%£■ 


z: 


,<?. 


7 


2-Z 


/ 

£ 


/^S^ZlsC^t^ZsC^/ 


2-/£ 


J '/:> 


7 


f3~ 


33  <'  y<r 


Z3$  /3~ 


T.  A.  Carr's  account  should  be  closed  like  B.  D.  Foley's. 

C.  S.  Baxter's  account  should  be  closed  by  putting  the  Balance  in 
red  ink  on  the  smaller  (credit)  side  of  the  account.  The  Balance  should 
be   brought  down   on   the   opposite  side  in   black  ink. 

S.  N.  Good's  account  balances.  It  should  be  ruled  with  single 
lines   only  as  it  contains   but  one  item   on   each  side. 


J2f,9?,jJk-v-v-ziy 


/<?- 


"7- 


Jh«. 


if 


/ 


&  3  y^rj/a^?,  3  o 


4 


Cj  js~ 


C.  D.  Sand's  account  should  not  be  ruled  as  it  contains  but  one 
item. 

Rules  for  Transferring  Red  Ink  Items: 

1.  Everything  entered  in  red  ink  to  close  must  be  brought  down 
in  black  ink  on  the  opposite  side  of  the  ledger. 

2.  Inventories,  Balances,  and  Net  Worth  are  transferred  to  the 
opposite  side  of  the  same  account. 

3.  Profit  and  Loss  items,  including  Net  Profit,  must  be  trans- 
ferred  to   the   opposite  side   of  some   other   account. 

Proof  Trial  Balance.  After  the  ledger  has  been  closed,  nothing  re- 
mains open  on  the  books  but  assets  and  liabilities.  The  sum  of  the 
debits  (assets)  must  equal  the  sum  of  the  credits  (liabilities).  A  Proof 
Trial  Balance  is  taken  to  show  that  all  transfers  have  been  brought 
down   properly.     The   proof   trial   balance   should   always   be   made. 


58 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


/^so-v-y^^^U^L^t/  A^htz^cs6is?>?s>c*e^s  ^f^Ar  /^ 


/ 


/ 

/ 
/ 

2- 
2- 


^9/.  /3wL&<^s 


~&.&f, A^i^>te^L 


/So/  to 


When  listed  in  a  balanced  table  and  properly  explained  the  Proof 
Trial  Balance  becomes  the  Balance  Sheet  of  the  accountant.  This 
will   be  explained  in   the  advanced   work. 

Exercise  13.  On  a  sheet  of  ledger  paper  open  the  following  ac- 
counts and  a  Profit  and  Loss  account.  Open  three  accounts  on  the 
first  page  of  the  ledger  and  four  on  the  second.  The  Merchandise 
inventory  is  $455.  Close  the  ledger,  March  31.  Make  a  Proof  Trial 
Balance. 

'.  C.  D.  Bowen,  Proprietor 


19- 

Mar. 


15 


C  3        75  - 


19- 
Mar. 


C  2    2000 


Merchandise 


19- 

19- 

Mar. 

6 

C 

3 

315 

Mar. 

8 

C 

2 

117 

— 

12 

J 

1 

412 

— 

15 

C 

2 

252 

— 

21 

J 

1 

316 

—   I- 

22 

J 

1 

318 

— 

Expense 

19- 

k 

Mar. 

1 

20 

— 

15 

C  3 

12 

— 

30 

C  3 

16 

— 

CLOSING   THE  LEDGER 

59 

Cash 

• 

19- 
Mar. 

31 

C  2   2519  L- 

19- 
Mar.    |31 

C 

3 

738 

C.  S.  Barton 

19- 
Mar. 

18 

C 

3 

300 

19- 

Mar. 

12 
21 

J 
J 

1 

1 

412 
316 

& 

B.  E.  French 

19- 
Mar. 

22 

J 

1 

318 

19- 
Mar. 

25 

C 

2 

150 

— 

SET  I  (Completed) 

1.  Make  a  Statement  of  Profit  and  Loss  from  the  trial  balance 
and    the    inventory    of    $142.50,    given    in    Chapter    VII. 

2.  Make   a   Statement   of   Assets   and    Liabilities. 

3.  Close  the  manuscript  ledger,   using  these  statements  as  guides. 

4.  Make   a   Proof   Trial   Balance,    February   1. 

After    the    work    has    been    approved    by    the    teacher: 

1.  Copy  the  Statements  of  Profit  and  Loss  and  of  Assets  and 

Liabilities  in  the  blank  books. 

2.  Close  the  ledger  in  the  blank  books. 

3.  Examine    your    ledger    to    see    whether    it    agrees    with    the 

Proof   Trial    Balance   of   your   manuscript   ledger. 

SET   II  (Completed) 

Make  statements  of  Profit  and  Loss  and  of  Assets  and  Liabilities, 
using  the  inventory,  $275,  given  in  Chapter  VII.  Close  the  ledger 
and  make  a  proof  trial  balance.  Copy  everything  in  the  blank  books 
in  the  same  way  as  in  Set  I. 

Oral  Exercise.  1.  Analyze  the  journal  and  cash  book  entries  of  Set 
II.  Apply  the  rule  of  Debits  and  Credits,  and  give  a  reason  for  the 
debit  and  the  credit  of  each  entry. 

2.  Analyze  the  ledger  of  Set  II  by  giving  the  reason  for  the  debits 
and  credits  of  each  account  and  by  explaining  what  the  difference  of 
each  account  means. 

Special  Instructions  to  the  Student.  You  have  now  completed  the 
necessary  steps  in  entering  the  transactions,  proving  the  work,  finding 
out  the  condition  of  the  business,  and  proving  up  the  ledger  after 
closing.  This  has  been  done  with  Sets  I  and  II.  You  should  now 
understand  the  routine  work  of  each  of  these  months,  how  each  step  is 
taken,  and  why. 


60  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

You  should  be  able  to  rule  paper  for  any  of  the  books  you  have 
used.  You  should  be  able  to  balance  a  cash  book  and  to  close  any 
ledger  account  properly  without  having  a  model  before  you. 

Can  you  analyze  any  entry  and  any  account  that  you  have  had? 
Your  ability  to  do  this  and  to  think  out  new  transactions  will  to  a 
large    extent    determine    your    progress. 

Accuracy.  You  have  learned  by  this  time  that  to  hurry  the  work 
usually  means  a  lack  of  accuracy.  You  must  take  time  to  do  the  work 
accurately.  Inaccurate,  careless  figures,  poor  form,  and  hurried  com- 
putations mean  a  lack  of  accuracy.  Careful  work  when  making  the 
entries  and  posting  will  save  much  of  the  time  that  otherwise  would 
have  to   be   devoted   to   finding   mistakes. 

Neatness.  All  papers  that  you  make  out  should  be  the  very  best 
you  can  do.  Your  penmanship  should  be  written  in  a  good  business 
style  that  is  free  from  flourishes.  Your  writing  must  not  be  too  large, 
as  many  books  and  forms  have  narrow  rulings.  You  should  be  ex- 
tremely  particular   about  your  figures.     Never  join   them  together. 

No  word  or  figure  written  in  ink  should  ever  be  marked  over  or 
erased.  A  red  line  should  be  drawn  through  the  incorrect  word  or 
figure  and  the  correct  word  or  figure  written  above  in  black  ink.  Books 
of  entry  often  become  valueless  as  a  means  of  proving  an  account,  in 
case  of  a  dispute  between  the  parties,  because  they  are  poorly  kept. 
Careless  corrections  and  lack  of  neatness  may  result  in  the  refusal  of  a 
court  to  allow  the  books  to  be  used  as  evidence. 

The  cultivation  of  habits  of  accuracy  and  neatness  will  be  of  great 
value   to   you   in   business   life. 

SET  III.  RETAIL  FLOUR  AND  FEED 

a)  Enter  the  following  transactions  in  the  books  of  entry,  or  if  the 
teacher  desires,  they  may  be  entered  on  loose  sheets  of  paper  and 
afterwards  copied  in  the  books. 

March  1.  C.  S.  Morton  began  the  Flour  and  Feed  business  by 
investing  cash,  $2500. 

2.  Paid  rent  of  store  for  one  month,  $40. 

3.  Bought  of  the  City  Flour  Co.,  for  cash: 

50  bbl.  Lily  Flour  at  $4.35 

4.  Bought  of  the  Valley  Mills,  on  account: 

4000  lb.   Bran  at  $2.60  per  hundred 
1000  lb.   Corn  Meal  at  $1.50  per  hundred 

5.  Sold   G.    C.    Grace,   on   account: 

15  bbl.  Lily  Flour  at  $4.90 
300  lb.'  Corn  Meal  at  $1.85  per  hundred 
Have  you  extended  the  amount  of  each  item? 


CLOSING  THE  LEDGER  61 

6.     Cash  sales  for  the  week,  $37.35. 

8.  Paid  an  advertising  bill  in  cash,   $18.75. 

9.  Bought   of   the   Wright   Grain   Co.,  on   account: 

500  bu.  Yellow  Corn  at  62j£ 
1000  bu.  White  Oats  at  37j£ 

10.  Sold  B.  C.  Yoder,  on  account: 

500  lb.  Bran  at  $3.25  per  hundred 
100  bu.  Yellow  Corn  at  78f£ 

11.  Sold  F.  C.  Winter,  on  account,   10  days: 

25  bbl.  Lily  Flour  at  $4.95 

12.  Paid  Lowe  Print  Co.  $13.75  for  printing  bills  and    letter 

heads. 

13.  Cash  sales  for  the  week,  $62.60. 

13.     Paid  the  Valley  Mills  Co.  $75,  on  account. 

15.     Received  of  G.  C.  Grace  cash  on  account,  $50. 

15.  Bought  of  the  Western  Coal  Co.  for  cash: 

4  tons  coal  at  $5.40 

16.  Bought  of  the  Badger  Flour  Co.,  on  account: 

200  sacks  Whole  Wheat  Flour  at  35j£ 
125  bu.  Wheat  at  89j£ 

17.  Sold  G.  C.  Grace,  on  account: 

50  bu.  Wheat  at  97^ 
200  bu.  Yellow  Corn  at  76^ 
25  sacks  Whole  Wheat  Flour  at  48j£ 

18.  Paid   the  Valley   Mills   Co.   the  balance  due  them,   $44. 

19.  Bought  of  the  Moore  Flour  Co.,  on  account: 

75  bbl.  Lily  Flour  at  $4.25 
500  lb.  Corn  Meal  at  $1.55 

20.  Cash  sales  for  the  week,  $76.15. 
20.     B.  C.  Yoder  paid  $75,    on  account. 

22.     F.   C.   Winter  paid  for  his  invoice  of  the  11th,  $123.75. 

22.  Paid  the  Badger  Flour  Co,  $125,    on  account. 

23.  Sold  F.  C.  Winter,  on  account,  30  days: 

30  bbl.  Lily  Flour  at  $5.05 
300  lb.  Corn  Meal  at  $1.90 

24.  Bought  of  the  Valley  Mills  Co.,  on  account: 

750  bu.  Yellow  Corn  at  61^ 

25.  G.   C.  Grace  paid  $125,  on  account. 

26.  Sold  B.  C.  Yoder,  on  account: 

500  bu.  White  Oats  at  47^ 

27.  Cash  sales  for  the  week,  $87.45. 

29.  Sold  G.  C.  Grace,  on  account: 

1000  lb.  Bran  at  $3.35 
100  sacks  Whole  Wheat  Flour  at  45^ 

30.  The  proprietor  withdrew  $60     from  the  business. 


62 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


31.     Cash  sales  for  two  days,  $31.95.  r 

31.     Paid  clerk's  salary  in  cash,  $32. 

31.     Paid  Badger  Fuel  Co.  $32.75  for  making  deliveries. 

b)  Post  to  the  ledger. 

c)  Take  a  Trial  Balance  of  differences. 

d)  Make  Statements  of  Profit  and  Loss  and  of  Assets  and  Liabili- 
ties, using  the  following  inventories: 

Merchandise,    per   schedule   on   file,    $998.25 

Expense,   2   tons   coal   at   $5.40,    $10.80 

What  effect  will  the  inventory  of  $10.80  have  on  the  loss  in  Ex- 
pense?    Why? 

What  effect  will  it  have  on  the  assets  of  the  business? 

Does  the  Expense  inventory  make  the  net  worth  of  the  business 
greater  or  less?     Why? 

e)  Close  the  accounts  in  the  ledger  in  the  following  order: 

1.  Merchandise 

2.  Expense,  like  the  following: 


PAGE  5 


'9- 

2- 

P- 
2-o 
3o 

3 

3 
3 

3 

r 

/ o 
3o 

2-s 
/s 

3/ 

3  / 

7 

2-J- 

- 

ff 

t/o 

r<r 

tAo 

Xa 

/ 

S 

ZJ 

><?- 


Ua^-^3 /    (p^K^e^T^Ld^ 


<r 


t3 


/jr 


<xU 


PAGE   7 


CLOSING  THE  LEDGER  63 

3.  Profit  and  Loss 

4.  C.  S.   Morton 

5.  Cash 

6.  Personal  Accounts,  except  the  following: 

Wright  Grain  Co.'s  account 
Moore  Flour  Co.'s  account 
f)    Make  a  Proof  Trial  Balance. 

Exercise  14.     From  the  following  Trial  Balance  and  inventory,  make 
a  Six-Column   Statement: 

TRIAL    BALANCE,    MARCH    31,    19  — 

G.  E.  Betts,   Proprietor $     75.00  $2000.00 

Merchandise 1976.25  1271.30 

Expense 72 .  50 

Cash 2846.30  982.50 

L.  N.  Newton 525.00  170.00 

C.  L.  Boyer 375.00  305.00 

B.  C.  Bauer 150.00  615.00 

M.  C.  Morter 200.00  876.25 

$6220.05         $6220.05 
Merchandise  inventory,  $846.25. 

Exercise  15.     From    the    following    Trial    Balance   and  inventories, 
make   Statements   of   Profit   and   Loss  and   of   Assets  and'  Liabilities. 

TRIAL    BALANCE,    MAY    31,    19  — 

C.  E.  Sorenson,  Proprietor $  125.00         $2500.00 

Merchandise ' 2136.45  1512.40 

Expense 81 .  75 

Cash 3174.25  1217.85 

B.  C.  Parsons 312.15  72.15 

L.  E.  Sterns 296.35  120.35 

F.  A.  Beggs 586.40  164.25 

W.  A.  Trester 263.85  936.35 

G.  E.  Zartner 230.45  683.30 

$7206.65         $7206.65 
Merchandise  inventory,  $667.15. 
Expense  inventory,  $15. 


64  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

REVIEW  QUESTIONS 

1.  Give  the  rule  of  debits  and  credits. 

2.  Define  merchandise.     Define  expense. 

3.  Explain  the  use  of  the  cash  book,  and  tell  how  it  is  posted. 

4.  Explain  the  posting  of  the  journal. 

5.  Define  account,  posting,  assets,  liabilities,  inventory. 

6.  (a)   What  is  the  ledger?     (b)   What  is  its  use? 

7.  (a)   Classify  accounts  with  persons,    (b)  For  what  should  each  kind  of  personal 
account  be  debited  and  credited? 

8.  Explain  nominal,  real,  and  mixed  accounts  and  give  examples  of  each. 

9.  (a)   What  is  the  object  of  the  trial  balance?     (b)   What  does  the  trial  balance 
prove?  (c)   Is  it  an  absolute  proof?    Explain. 

10.  What  is  the  object  of  making  a  six-column  statement? 

11.  Give  the  rules  governing  the  making  of  statements. 

12.  Give  two  ways  of  finding  the  profit  on  merchandise. 

13.  How  do  you  find  the  loss  on  Expense  if  there  is  an  inventory?  Give  your  reason. 

14.  Give  two  ways  of  finding  the  net  worth  of  a  business. 

15.  Explain  the  reasons  for  closing  the  ledger. 

16.  How  do  you  close  the  Expense  account  when  there  is  an  inventory? 

17.  How  do  you  close  the  Merchandise  account  when  there  is  an  inventory? 

18.  How  do  you  close  the  Profit  and  Loss  account? 

19.  How  do  you  close  the  Proprietor's  account? 

20.  (a)   What  is  a  proof  trial  balance?     (b)   Why  is  it  necessary? 

21.  When  should  red  ink  be  used  in  closing? 

22.  How  should  each  red  ink  entry  be  transferred? 

23.  How  should  a  personal  account  with  the  debit  side  the  larger  be  closed? 

24.  How  should  a  personal  account  with  the  credit  side  the  larger  be  closed? 

25.  How  should  a  personal  account  with  one  item  of  $75  on  each  side  be  closed? 


CHAPTER  IX 
NOTES  RECEIVABLE  AND  NOTES  PAYABLE 


In  the  transactions  so  far  given  purchases  and  sales  of  merchandise 
and  open  accounts  have  been  settled  in  cash.  That  is  the  most  common 
custom  in  most  lines  of  business,  but  notes  are  frequently  used  in  settlement 
of  invoices  and  accounts.  Promises  in  the  form  of  accepted  time  drafts  are 
also  used  for  the  same  purpose.  We  shall  consider  here  only  promissory 
notes  and  leave  time  drafts  for  a  later  chapter. 

Promissory  Notes.  A  promissory  note  is  an  unconditional  promise 
in  writing  to  pay  a  certain  sum  of  money  to  the  order  of  another  person  or 
to  bearer,  on  demand  or  at  a  fixed  time. 


Parties.  In  this  promissory  note  S.  D.  Gross  is  the  maker  and  C.  B. 
Parker  the  payee.  The  maker  of.  a  promissory  note  is  the  person  who  signs 
it  and  by  so  doing  agrees  to  pay  it.  The  payee  of  a  note  is  the  one  in  whose 
favor  it  is  drawn.  He  may  receive  payment  himself  or  order  its  payment 
to  some  one  else. 

Date  of  Maturity.  If  the  time  is  expressed  in  days,  the  exact  time 
should  be  counted.  If  the  time  is  expressed  in  months,  calendar  months 
must  be  counted.     This   note  made  payable   one   month  after  date  would 

65 


66 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


be  due  January  28.     The  due  date  should  be  found  and  written  in  by  the 
maker  of  the  note. 

Indorsement.  If  a  note  contains  the  negotiable  words  order  of, 
or  order,  or  bearer  and  the  elements  included  in  the  definition  of  a 
promissory  note,  it  may  be  transferred.  This  transfer  must  be  by  indorse- 
ment except  when  it  is  made  payable  to  a  person  or  bearer.  An  indorsement 
is  written  on  the  back  of  the  note,  on  the  left  hand  end.  The  payee  becomes 
the  first  indorser  and  the  one  to  whom  he  transfers  it,  the  indorsee. 

Blank  Indorsement.  If  C.  B.  Parker 
wishes  to  transfer  this  note  to  D.  E. 
Durbin,  he  may  simply  write  his  name 
on  the  back  about  an  inch  from  the  left 
hand  end.  This  makes  it  payable  to  D. 
E.  Durbin  or  any  one  else.  It  is  usually  a 
poor  form  to  use  in  transferring  a  note  as 
it  makes  it  payable  to  the  bearer. 

Special  Indorsement.     In  a  special  in- 
dorsement, the  indorser  names  the  person 
to  whom  he  wishes  to  transfer  the  note. 
A  special  indorsement  by  C.  B.  Parker 
to  D.  E.  Durbin  would  be  written  as  follows: 


yp r/^S-rV^^L^^^^ 


This  is  a  much  safer  form  as  it  makes  it  necessary  for  D.  E.  Durbin, 
the  indorsee,  to  indorse  it  before  any  one  else  can  use  the  note. 


NOTES  RECEIVABLE  AND  NOTES  PAYABLE 


67 


Notes  Receivable.  A  note  receivable  is  another's  note  given  to  the 
business. 

Rules  for  Notes  Receivable.  Debit  Notes  Receivable  at  the  face  value 
for  all  notes  of  others  received  by  the  business. 

Credit  Notes  Receivable  at  the  face  value  for  all  notes  of  others  paid 
by  them  and  for  all  notes  of  others  parted  with  in  any  other  way. 

If  S.  N.  Bruer  owes  the  business  $175  and  gives  cash  in  payment, 
the  debit  and  credit  effect  would  be 

Cash  Debit,  $175 

S.  N.  Bruer  Credit,  $175 

But  if,  instead  of  paying  cash,  he  gives  the  business  his  note,  a  note 
receivable  comes  into  the  business  instead  of  cash.  His  account  must  be 
credited  the  same  as  when  cash  was  received.  He  still  owes  $175  but 
he  no  longer  owes  it  on  account.  His  indebtedness  is  shown  in  the 
Notes  Receivable  account.  The  journal  entry  for  this  transaction  would 
be  as  follows: 


7s  ~ 


/?s\— 


In  posting  to  the  ledger  account  of  Notes  Receivable,  the  due  date 
should  be  recorded  in  the  explanatory  column  of  the  Notes  Receivable 
account  unless  a  special  book  is  kept  for  the  purpose  of  giving  details  of  notes. 

When  S.  N.  Bruer  pays  the  note,  cash  is  received  and  the  account  of 
Notes  Receivable  must  be  credited,  because  it  is  the  note  that  yields  the 
value,    not  the  account. 

The  entry  in  the  cash  book  would  be: 

Cash  Receipts 


tZsrz^   <?* 


y^T^^d^i^c^,     ^y7.1&u^^lJ^^c^\-  /ys~ 


The  Notes  Receivable  account  must  show  an  asset  if  the  account 
does  not  balance.    It  should  be  closed  as  shown  on  page  68. 

When  S.  N.  Bruer  pays  his  note  he  should  receive  his  note  back  can- 
celed. The  note  should  be  canceled  by  writing  across  the  face  of  the  note, 
Paid,  the  date,  and  the  signature  of  the  person  receiving  the  money. 


68 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


C^Htd^f 


*f- 


/J~ 


kJZzJ-, 


% 

// 
/je 


J 

i 


A^Z<^?Zs9^C*CS 


\J 


5U2+ 


-%». 


T 


3  2-S 


5~e 


6~o 


'9- 


9 

bo 

3/ 


w 


■rpr 

7/2-Sb 


/2-/2-nr?    ' 


The   method    of   doing   this  is   shown    on  the  note     illustrated     on 


page   65. 


guns,  f/t^c^f.  ffiinsZufisL^! 


If  the  maker  of  the  note  pays  only- 
part  of  the  amount  that  he  owes,  a  re- 
ceipt should  be  given  him  and  a  state- 
ment made  on  the  back  of  the  note  with- 
out any  signature,  as  in  the  illustration 
to  the  left. 

Exercise  16.  On  journal  paper  make 
entries  for  the  following  transactions. 

November     1.     Sold  an  invoice  of  goods  to  C.  S.  Poe  for  $375,  on 
account. 

4.     Received  cash  of  C.  S.  Poe,  on  account,  $100. 

6.     Sold  an  invoice  of  goods  to  D.  E.  Kramer,  for  $425, 
on  account. 

8.     Received   C.  S.   Poe's  note  at  10  days  for  $175,  on 
account. 


9. 


12. 


Received  D.  E.  Kramer's  note  at  15  days  for  $425. 
in  full  of  account. 


Sold  an  invoice  of  goods  to  B.  A.  Schwab  for  $225, 
and  received  his  note  at  15  days,  in  payment. 

Make  two  entries  for  this  transaction,  one  for  the  sale  of  the  goods  and 
the  other  for  the  note  received. 


NOTES  RECEIVABLE  AND  NOTES  PAYABLE 


69 


15.     Received  C.  S.  Poe's  note  at  15  days  for  $100,  in  full 

of  account. 
18.     C.  S.  Poe  paid  his  note  of  the  8th,  for  $175. 
20.     Sold  an  invoice  of  goods  to  S.  N.  King  for  $218,  on 

account. 

24.  D.  E.  Kramer  paid  his  note  of  the  9th,  for  $425. 

25.  Received  of  S.  N.  King  cash,  on  account,  $100. 

27.     Received  of  B.  A.  Schwab  cash,  for  his  note  of  the 

12th,  $225. 
30.     C.  S.  Poe  paid  his  note  of  the  15th,  for  $100. 
Notes  Payable  are  notes  issued  by  the  business  which  the  business 
must  pay. 

Rules  for  Notes   Payable.     Debit  Notes   Payable  at  the   face  value 
when  our  notes  are  paid  by  the  business. 

Credit  Notes  Payable  at  the  face  value  when  our    notes  are    issued 
by   the  business. 

If  the  business  pays  C.  S.  Kerr  $200  on  account,  the  debit  and  cred- 
it effect  would  be 

C.  D.  Kerr  Debit,  $200 

Cash  Credit,  $200 

If,  instead  of  paying  cash,  the  business  gives  him  a  note  for  $200, 
the  entry  would  be  a  credit  to  Notes  Payable  instead  of  to  Cash. 


Journal 


7 


2-oo  — 


When  the  maker  pays  his  note,  Notes  Payable  must  be  debited  and 
Cash  credited  in  the  Cash  Book. 

Cash  Payments 


'/ens-; 


r    (^  //^^^/^^^^^^^^^ 


■#/*     2  co  — > 


Notes  Payable  account  must  show  a  liability  if  the  account  does  not 
balance.     It  should  be  closed  as  on  page  70. 


70 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


yf^t^^  /^zz^^zz^lU^ 


"f- 


6fylA<2j 


u- 


Jo 


4 


// 
// 


2  /  2 
// 


S  — 


/fs 


o22-2J~ 


2~S~C4fzst, 


fa 


Z^t^y   /C 


/     A^i^ti^yi^a^y 


7 

r 


/<?  s  - 

2/  I  2S 


JZ2 


2J 


•fj~ 


Exercise  17.     On  journal  paper  make  entries  for  the  following  trans- 
actions. 

October     3.     Bought  an  invoice  of   goods    of   J.   A.   Burk  for  $260, 

on  account. 
5.     Gave  J.  A.  Burk    my   note,  payable  20  days  after  date, 

for  $160,  on  account. 
7.     Bought  an  invoice  of  goods  of  C.  E.  Haws  for  $385, 

on  account. 
9.     Bought  an  invoice  of  goods  of  G.  R,  Rand  for  $475, 

and  gave  my  note,   payable   10  days  after  date,   in 

payment. 

Make  two  entries. 

10.     Paid  C.  E.  Haws  cash  on  account,  $150. 

14.     Bought  an  invoice  of  goods  of  B.  E.  Bond,  on  account, 


16.     Paid  J.  A.  Burk  $100  on  account. 

18.  Gave  C.  E.  Haws  my  note,  payable  10  days  after  date, 

for  $235. 

19.  Paid  G.  R.  Rand  for  my  note  of  the  9th,  $475. 

23.     Gave  B.  E.  Bond  my  note,  payable  30  days  after  date, 

for  $180,  on  account. 
25.     Paid  J.  A.  Burk  cash  for  my  note  of  the  5th,  $160. 
28.     Paid  C.  E.  Haws  cash  for  my  note  of  the  18th,  $235. 

Exercise  18.     On  journal  paper  make  entries  for  the  following  trans- 
actions.   Do  not  forget  that  the  explanation  of  each  entry  is  important. 


NOTES  RECEIVABLE  AND  NOTES  PAYABLE  71 

November     2.     Gave  S.  N.  Hammond  my  note,  payable  in  30  days,  for 
$375,  on  account. 

4.  Received   B.   C.    Chase's   note,   payable  in    15   days, 

for  $250,  on  account. 

5.  Gave  H.  C.  Field  my  note,  payable  in  30  days,  for 

$185,  on  account. 
7.     Gave  C.   N.   Day  my  note,  payable  in  10  days,  for 

$413.50,  on  account. 
9.     Received   S.    G.    Hoan's   note,    payable   in    15   days, 

for  $95,  on  account. 
12.     Bought  merchandise  of  C.  D.  Traxler  amounting  to 

$127.50,  and  gave  my  note,  payable  in  two  months, 

in  payment. 

Make  two  entries. 

14.     Received  F.  A.  Frame's  note,  payable  in  three  months, 

for  $750,  on  account. 
16.     Gave  G.   E.   Minster  my  note,  payable  in  45  days, 

for  $600,  on  account. 
18.     Sold  merchandise  to  S.  E.  Niles  amounting  to  $247, 
and  received  his  note,  payable  in  60  days,  in  pay- 
ment. 
How  many  entries  should  be  made?    Why? 

20.     Received   H.   I.   Larson's  note,   payable  in   15   days, 
for  $450,  on  account. 
Exercise  19.     Find  the  date  of  maturity  of  each  note  in  Exercise  18, 
and  make  entries  in  a  manuscript  cash  book  for  the  payment  of  each  note. 


CHAPTER  X 
INTEREST  AND  DISCOUNT  ON  NOTES 


Interest  is  money  paid  for  the  use  of  money. 

When  a  note  contains  a  promise  to  pay  a  certain  sum  of  money  with 
interest  at  a  specified  rate  or  simply  with  interest,  the  note  is  said  to  bear 
interest.    The  sum  paid  at  maturity  for  the  use  of  the  money  is  interest. 

When  interest  is  allowed  or  paid  in  advance  for  the  use  of  money,  it  is 
commonly  called  discount.  It  is  just  as  much  interest  as  if  it  were  paid 
after  one  has  enjoyed  the  use  of  the  money. 

The  60-Day  Method.     This  method  is  based  on  the  principle  that  the 

Interest  of  $1  for  a  year  of  360  days,  at  the  rate  of  6%,  is  $  .06 

Interest  of    1  for  60  days,  at  the  rate  of  6%,  is      .01 

Interest  of    1  for  6  days,  at  the  rate  of  6%,  is      .001 

Interest  of    1  for  600  days,  at  the  rate  of  6%,  is      .10 

This  method  is  an  easy  one  to  use  because  it  is  on  the  decimal  system. 
To  multiply  by  .01,  point  off  two  places  to  the  left  in  the  principal.  To 
multiply  by  .001,  point  off  three  places  to  the  left  in  the  principal.  By 
.10,  one  place. 

Any  number  of  days  may  be  divided  into  fractional  parts  of  600,  60,  or 
6,  or  into  multiples  of  them. 

For  Example: 

For  15  days,  take  J  of  the  interest  for  60  days. 

For  18  days,  take  3  times  the  interest  for  6  days. 

For  25  days,  take  4^  times  the  interest  for  6  days. 

For  50  days,  take  the  interest  for  30  days  (§  of  60)  and  for  20  days 
(i  of  60). 

The  interest  should  always  be  found  for  the  time  at  6  %  and  then  at  the 
given  rate  by  adding  or  subtracting  a  fractional  part. 

For  Example*. 

At  5%  find  the  interest  at  6%  and  subtract  -|-  of  it. 

At  7%  find  the  interest  at  6%  and  add  ^  of  it. 

At  8%  find  the  interest  at  6%  and  add  ^  of  it. 

At  9%  find  the  interest  at  6%  and  add   \  of  it. 

At  10%  find  the  interest  at  6%  and  add  f  of  it. 

72 


INTEREST  AND  DISCOUNT  ON  NOTES 


73 


Problem:     Find  the  interest  of  $127.25  for  51  days  at  5%. 

.12725  Interest  for  6  days  at  6  % 
1.018    Interest  for  48  days  at  6% 

.0636  Interest  for   3  days  at  6  % 
1.0816  Interest  for  51  days  at  6% 

.  1802  Interest  for  51  days  at  1  % 

.9014  Interest  for  51  days  at  5% 
The  interest  is,  then,  90jzL 

The  Cancellation  Method  is  preferred  by  some.      The  formula  is  as 
follows: 


Principal   X 


Time  in  days 
360 


=    Interest. 

100 


If  the  rate  is  six  per  cent,  the  formula  may  be  contracted  to 

Principal  X  Time  in  days   =  Interest> 
6000 


127.25  X  —   X  — 
360         100 


10.81625   _ 


12 


=    .901+  or  90^. 


In  the  last  chapter,  the  principle  was  established  that  Notes  Receivable 
and  Notes  Payable  must  be  debited  and  credited  at  their  face  value.  This 
principle  is  not  changed  when  a  note  bears  interest.  Whatever  allowance 
is  made  for  interest  must  be  entered  in  a  separate  account,  the  Interest 
account. 

If  C.  D.  Cook  gave  his  note  to  the  business  on  January  8,  for  $375, 
payable  60  days  after  date,  with  interest  at  6%,  the  entry  in  the  journal 
would  be 

Notes  Receivable,  $375 

To  C.  D.  Cook,      $375 
When  the  note  is  paid  on  March  9,  the  result  would  be 
.  Cash,  $378.75 

To  Notes  Receivable,  $375.00 
Interest  3.75 

As  an  entry  on  the  Cash  Receipts  it  would  be  made  as  follows: 


y^Z^/f^c<«^z^^ 


*dfo^£dsL^dst~ 


L^T^^a^-cnz-e^Coe^. 


3yJ- 
3 


7^ 


74 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Our  note  in  favor  of  C.  D.  Gordon,  dated  February  3,  for  three  months, 
for  $460,  with  interest  at  6%,  would  be  entered  in  the  journal,  on  February 
3,  as  follows: 

C.  D.  Gordon,  $460 

To  Notes  Payable,  $460 

When  the  business  pays  this  note  on  May  3,.  the  effect  would  be  as 
follows: 

Notes  Payable,  $460 .  00 

Interest   '  6.90 

To  Cash  $466 .  90 

As  an  entry  on  the  Cash  Payments,  it  would  be  made  as  follows: 


% 


O^Z^r- 


3 
3 


//.£ 


&  f 6 


Debit  the  Interest  account  when  the  business  allows 


Rule  for  Interest, 
it  to  others. 

Credit  the  Interest  account  when  others. allow  it  to  the  business. 
Exercise    20.     Enter    the   following    transactions    on    journal    paper. 
The  transactions  may  be  used  as  an  oral  exercise  before  writing  them. 

1.  May  1.  Received  C.  E.  Bowen's  note  for  $720,  payable  in  10  days, 
with  interest  at  6%. 
Gave  C.  I.  Bell  my  note  for  $240,  payable  in    15    days, 

with  interest  at  6  %. 
Gave  W.  A.  Worth  my  note  for  $900,  payable  in  15  days,  with 

interest  at  6%. 
C.  E.  Bowen  paid  his  note  in  transaction  1,  with  interest,  $1.20. 
Received  F.  A.  Hunt's  note  for  $75,  payable  in  10  days, 

with  interest  at  6%.  . 

B.  D,  Dale  gave  the  business  his  note  for  $480,  payable  in 

15  days,  with  interest  at  8%. 
Paid  my  note  in  transaction  2  and  interest,  60j£. 
Paid  my  note  in  transaction  3  and  interest. 
22.  F.  A.  Hunt  paid  his  note  in  transaction  5,  with  interest. 
30.  Received   payment    of    S.    D.    Dale's   note  and  interest  in 
transaction  6. 
Others'  Notes  Discounted.     To  discount  a  note  at  a  bank  or  with  a 
broker  is  to  sell  the  note  and  pay  in  advance  for  the  use  of  the  money. 

It  is,  in  effect,  borrowing  the  face  value  of  the  note  for  the  unexpired 
time  of  the  note.  The  business  receives  the  use  of  the  money  for  the  time 
from  the  date  of  discount  to  the  date  of  maturity.  This  is  called  the  term 
of  discount.     It  is  counted  in  exact  days. 


2. 

3. 

4. 
5. 

6. 

7. 

8. 

9. 

10. 


3. 

5. 

11. 
12. 

15. 

18. 
20. 


INTEREST  AND  DISCOUNT  ON  NOTES 


75 


Problem:     S.  N.  Gray's  note  for.  $625,  dated  May  8,  payable  in  60 
days,  is  discounted  at  the  bank  on  June  16  at  6%.    The  value  of  the  note 
would  be  found  as  follows: 
Date  of  Maturity,  July  7. 

Term  of  discount,  from  June  16  to  July  7,  is  21  days. 
The  discount  (interest  in  advance)  of  $625,  for  21  days  at  6%  is  $2.19. 
$625  minus  $2.19  is  $622.81,   the  proceeds  of  the  note.     The  bank  will 
deduct  the  $2.19  as  interest  on  the  $625  for  21  days  and  give  the  difference, 
$622.81,  to  the  person  discounting  the  note. 

The  effect  on  the  accounts  would  be  as  follows: 
Cash  $622.81 

Interest  2.19 

To  Notes  Receivable  $625.00 
Since  discount  on  a  note  is  interest  on  the  note  paid  in  advance,  but  one 
account  called  Interest  will  be  kept  for  both  interest  and  discount. 

In  entering  it  in  the  cash  book,  the  entry  must  be  made  on  the  theory 
that  $625  was  received  for  the  face  of  the  note  and  $2.19  paid  for  the  use 
of  the  money.    The  entry  would  be  as  follows: 

Cash  Receipts 


/£ 


y^^/££^^  ^>jt 


Cash  Payments 


U-a^n^e^ 


rC 


\^nn^L€^L^L^d^~  Jyi<4<y./>/da.  ./t/^-iw^ 


r 


>/ 


t 


Our  Notes  Discounted.  The  business  may  borrow  money  from  a  bank 
or  a  broker  on  its  own  note.  A  note  is  issued  and  the  interest  paid  in  advance 
by  subtracting  the  discount  for  the  time  of  the  note  from  the  face  of  the 
note. 

Our  note,  payable  in  60  days,  for  $225,  discounted  at  the  bank  at  6% 
would  be  entered  on  the  Cash  Receipts  as  a  credit  to  Notes  Payable  for 
$225  and  on  the  Cash  Payments  as  a  debit  to  Interest  for  $2.25. 

Rule  for  Discount  on  Notes.  Debit  Interest  for  all  discount  allowed 
by  the  business  on  our  notes  and  on  others'  notes. 

Credit  Interest  for  all  discount  allowed  to  the  business  on  our  notes 
and  on  others'  notes. 

Interest  account  is  a  nominal  account  and  shows  a  profit  if  the  credit 


76 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


side  is  the  larger  and  a  loss  if  the  debit  side  is  the  larger.    It  should  be  closed 
as  follows: 


Vfu. 


T 


/2- 


? 

// 

/3 


4/ 

3 


/o 


7^ 

2-6 


/S 


so 


/S 

3/ 


/  0  /o 


Exercise  21.     Find  the  disco 

FACE 

DATE 

1. 

$650.00 

Sept.  4 

2. 

315.25 

May  3 

3. 

205.00 

July  6 

4. 

130.20 

Dec.  31 

5. 

930.00 

June  7 

6. 

815.40 

Aug.  1 

7. 

70.00 

Nov.  15 

8. 

1225.00 

June  17 

9. 

450.00 

March  8 

10. 

115.00 

April  30 

S    OF    DISCOUNT 

RATE 

October  9 

6% 

May  17 

6% 

July  20 

5% 

Jan.  24 

4% 

July  1 

7% 

Aug.  1 

8% 

Nov.  25 

6% 

July  8 

6% 

Mar.  28 

7% 

May  3 

6% 

Find  the  discount  and  the  proceeds  of  the  following  notes: 

TIME 

60  da. 
3  mo. 
30  da. 

2  mo. 
30  da. 
60  da. 
15  da. 
6  mo. 

3  mo. 
30  da. 

Exercise  22.     On  journal  paper  enter  the  following  transactions  in  a 
cash  book. 

Received  payment  of  S.   N.   Gordon's  note  for  $325,   and 

interest  for  30  days  at  6%. 
Paid  note  favor  C.  E.  Betts  for  $415,  and  interest  for  90 

days  at  6%. 
Discounted   at  the  bank  at   6%,   B.    E.    Bond's   note   for 

$350,  dated  May  31,  payable  30  days  after  date. 
Paid  note  favor  C.   N.   Briggs,  for  $265,  and  interest  for 

45  days  at  6%. 
Discounted  at  the  bank  at  6%,  our  note  for  $1500,  payable 

60  days  after  June  15. 
Discounted   at   the   bank  at  6%,    C.    N.    Good's   note   for 

$97.50,  dated  May  27,  payable  60  days  after  date. 
Received  payment  of  B.  E.  Reed's  note  for  $450.90,  and 

interest  for  three  months  at  5  %. 


June     2. 


5. 


9. 


12. 


15. 


20. 


24. 


INTEREST  AND  DISCOUNT  ON  NOTES  77 

27.  Discounted  at  the  bank  at  7%,  our  note  for  $1750,  payable 

30  days  after  June  27. 

28.  By  agreement  with  the  payee  of  our  note,  C.  S.  Boden, 

we  prepay  our  note  for  $250,  dated  June  15,  for  30  days, 
less  discount  for  the  unexpired  time  at  6%. 
What  account  should  be  debited  for  the  face  value  of  the  note? 
What  account  should  be  credited  for  the  discount? 
June  30.    Paid  C.  D.  Griffin  the  quarterly  interest  on  a  note  for  $1825 
in  his  favor,  dated  March  30,  payable  one  year  after  date,  with  interest  at 
6  %  per  annum,  payable  quarterly. 


CHAPTER  XI 
THE  SALES  BOOK  AND  THE  PURCHASE  BOOK 

Sales   Book 


i^t^z^-  /  7a 


4/ 


V^ 


Jo  -J^zy.^yy? 


Z- 


^Cs^^^^^^^z^  r#&  %z£ZjjJ£ 


3 


2-.7S- 
¥.fo 


/3 
2-U 


7^ 


^^z^u^C^-^3^^k-d/ 


J- 


3     c*LaQ>  ,  /^t^d^d^^L4^y,  4-/2-  -  /2-yt^J^: 


78 


7^ 


fj-z<s- 


'-y3<r 


/ff 


3f^ 


60 


THE  SALES  BOOK  AND  THE  PURCHASE  BOOK         79 

The  use  of  the  journal  as  a  book  of  entry  for  sales  of  merchandise  is 
not  desirable  if  the  business  makes  many  sales  on  account.  The  work  of 
posting  is  too  great  and  it  is  too  difficult  to  obtain  information  concerning 
sales,  when  recorded  in  the  journal. 

The  Sales  Book  should  contain  entries  for  all  sales  made  by  the  business 
so  as  to  show  the  volume  of  sales  for  any  month. 

In  the  sales  book,  the  first  column  is  used  to  record  the  items  sold  and 
the  second  for  the  amount  of  each  invoice.  The  form  here  illustrated 
represents  a  page  of  a  sales  book  used  by  a  retail  business,  or  one  doing 
mainly  a  retail  business  with  some  sales  at  wholesale. 

In  each  of  these  entries  Merchandise  is  understood  to  be  credited 
without  writing  it  down.  All  the  sales  on  account  were  formerly  entered 
in  the  journal  as  a  debit  to  the  account  of  the  customer  and  a  credit  to 
Merchandise.    They  are  now  entered  in  the  sales  book  only. 

As  the  entry  is  now  made,  it  is  equivalent  to  a  journal  entry  with 
several  debits  and  one  credit,  as  follows: 

H.  C.  Evans,  $  72 .  00 

C.  L.  Anderson,  85.25 

D.  E.  Bosshard,  188.00 

To  Merchandise,  $345.25. 

The  cash  sales  are  entered  in  the  sales  book  so  that  the  sales  book  will 
show  the  total  sales  for  the  month.  They  must  also  be  entered  in  the  cash 
book  to  show  that  the  cash  was  received.  The  entry  in  the  sales  book  auto- 
matically credits  Merchandise.  The  entry  in  the  cash  book  automatically 
debits  Cash.  Each  entry  is  checked  (V )  in  the  folio  column  so  as  to  show 
that  neither  item  is  to  be  posted. 

In  a  retail  store,  small  cash  sales  are  entered  from  the  cash  register  or 
from  the  sales  tickets  in  total  at  the  end  of  the  day.  The  items  sold  are 
rarely  recorded  in  the  sales  book.  The  cash  book  entry  would  be  made  as 
follows: 

Cash  Receipts 


May  3 


Merchandise 


Cash  sales 


47 


35 


The  sales  book  entry  has  the  effect  of  crediting  Merchandise.  The 
cash  book  entry  has  the  effect  of  debiting  Cash.  The  Cash  is,  therefore, 
posted  in  total  from  the  cash  book  and  the  Merchandise  in  total  from  the 
sales  book. 

Posting  the  Sales  Book.  Each  customer  is  debited  for  the  amount 
of  his  invoice  and  Merchandise  is  credited  for  the  total  of  the  sales  book  at 
the  end  of  the  month.  All  cash  sales  in  a  retail  business  are  checked,  and  are 
not  posted. 

The  entries  for  Set  IV  will  be  made  like  the  entries  just  illustrated. 


80 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


In  a  wholesale  or  jobbing  business,  there  are  few,  if  any,  small  cash 
sales.  A  sale  for  cash  may  mean  payment  in  from  five  to  ten  days.  In  that 
case,  the  sale  is  treated  the  same  as  a  sale  on  account.  It  is  entered  in  the 
sales  book  when  the  goods  are  sold  and  the  customer's  account  in  the  ledger 
debited.  When  he  makes  payment,  his  account  in  the  ledger  is  credited 
from  the  cash  book. 

But  if  a  cash  sale  is  made  to  some  one  not  a  regular  customer,  and  the 
cash  received  with  the  order,  the  entry  is  made  in  the  sales  book  in  the 
usual  way  and  the  entry  checked  in  the  folio  column.  It  is  also  entered 
in  the  cash  book  on  the  Receipts  side  and  checked.  No  ledger  account  is 
opened  up  but  the  debit  to  the  customer's  account  in  the  sales  book  is 
offset  by  the  credit  to  his  account  in  the  cash  book.  This  method  of  using 
the  sales  book  in  a  wholesale  or  jobbing  business  is  illustrated  in  the  page  of 
a  sales  book  shown  below.    The  entries  for  Set  V  will  be  made  in  this  way. 

Sales  Book 


U^^y^T^&y  2-J  ,  /? — ' 


S 


/  o  (^a^JL/£EZs£^Le^fr^?-z^ 


7? 

3J~-    3J~o 


2r 
~w^pt^Ay 

J~/3^cz^U  /^U&Ldj!^^&Ldy        2F—    /££0 

Jo 
//o  ,  s^T-^r-  <3~v  ^^z^u^dy 

f^^^»iW«E/^    /<t,/j\  /so  — 
s'^^^i^L^Ay/v^>A^y^dy     j  2*4  /Co  — 


fjr  /Cys~  Co 


soj  sCy 


2JT/ 


3S- 


/O.Si 


ft/ 


3^y-  — 
Zff7  f  J" 


THE  SALES  BOOK  AND  THE  PURCHASE  BOOK 


81 


The  Purchase  Book  is  another  book  that  takes  a  number  of  entries  out 
of  the  journal  and  by  so  doing  saves  work  and  classifies  entries. 

All  purchases  of  merchandise  made  by  the  business  should  be  entered 
in  the  purchase  book,  so  that  the  total  purchases  will  be  shown  in  one  book 
at  the  end  of  the  month.  Purchases  on  account  are  entered  in  the  purchase 
book  only.  Every  entry  is  a  credit  to  the  account  of  the  person  from  whom 
the  goods  are  bought  and  Merchandise  is  understood  to  be  debited.  The 
Merchandise  is  posted  in  total  only.  Cash  purchases  should  be  entered  in 
the  purchase  book  and  on  the  Payments  side  of  the  cash  book  and  checked 
in  both  places.  The  principle  is  exactly  the  same  as  applied  to  sales,  for 
both  retail  and  wholesale  businesses. 

The  items  are  not  entered  in  the  purchase  book  because  when  the 
business  buys  goods  it  receives  an  invoice,  which  is  filed.  To  this,  one  can 
refer  for  the  items  purchased.  The  purchase  book  of  a  wholesale  business 
is  illustrated  here. 

Purchase  Book 


OATE 


NAMES   AND   ADDRESSES 


JZ 


U- 


3o 


2-     /foz^uy.  ~Z2^< 


TERMS 


AMOUNT 


Cy>c4r,/Osc£t^. 


2^/2.y*J~ 


'/t>,srues/~3oe&z..    3  Q>  >£~  /  O 


/fo£ey,/J~d^.     /3y  s~o 


"(p^z^As  •      £<r 


/s 


7f3 So 


Posting.  Post  each  purchase  on  account  to  the  credit  of  the  account 
named.  Check  each  purchase  for  which  cash  was  paid,  unless  a  ledger 
account  is  to  be  opened  up  for  the  creditor.  Post  the  total  to  the 
debit  of  Merchandise  monthly. 

The  Journal.  By  the  elimination  of  all  purchases  and  sales  of  merchan- 
dise from  the  journal, 'it  becomes  a  subordinate  book.  In  it  are  entered, 
in  the  introductory  work,  chiefly  the  giving  and  receiving  of  notes,  entries 
to  adjust  mistakes,  and  memorandums  of  anything  important  enough  to 
require  a  permanent  record. 


82 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Exercise  23.  Enter  the  purchases  and  sales  of  Set  III  on  sheets 
of  paper  used  as  a  purchase  book  and  sales  book  respectively.  Check  cash 
sales  and  cash  purchases. 

Close  each  book. 

Exercise  24.  On  a  sheet  of  ledger  paper  open  the  following  accounts 
taken  from  a  ledger,  and  a  Profit  and  Loss  account. 

Close  the  ledger,  May  31.  You  can  take  do  proof  trial  balance  as  only 
part  of  the  ledger  accounts  are  given. 

Merchandise  inventory,  $352.15. 

Expense  inventory,  $5.75. 


D. 

E.    Mitchell 

. 

19- 

|  19- 

May 

31 

C 

9 

150 

- 

May 

1 

C 

8 

2200 

Merchandise 


19- 
May     31 


167580 


19- 

[May 


31 


S  12    143725 


. 

Expense 

19- 

May 

1 

8 
15 
31 

C 
C 

C 

c 

7 
7 
7 
9 

35- 
1025 
740 
30p 

Interest 


19- 

| 

19- 

1 

May 

3 

C  7 

325 

May 

8 

C 

8 

250 

18 

C  9 

150 

12 

C 

8 

115 

! 

29 

c 

10, 

535 

THE  SALES  BOOK  AND  THE  PURCHASE  BOOK  83 

REVIEW  QUESTIONS 

1.  Analyze  each  of  the  following  accounts  by  telling  for  what  each  is  debited, 
for  what  credited,  what  the  difference  shows,  and  why:  (a)  Cash;  (b)  Merchandise; 
(c)  Expense;  (d)  a  customer's  account;  (e)  a  creditor's  account;  (f)  the  proprietor's  account. 

2.  What  is  a  promissory  note? 

3.  Name  the  parties  to  a  promissory  note. 

4.  Name  two  kinds  of  indorsements  and  explain  each. 

5.  How  should  a  promissory  note  be  canceled? 

6.  (a)  Give  the  rules  for  debiting  and  crediting  Notes  Receivable,  (b)  What 
does  the  Notes  Receivable  account  show  in  the  statement,  and  why? 

7.  (a)  Give  the  rules  for  debiting  and  crediting  Notes  Payable,  (b)  What  does 
the  Notes  Payable  account  show  in  the  statement,  and  why? 

8.  How  should  a  partial  payment  on  a  note  be  recorded  on  the  note? 

9.  What  is  the  difference  between  interest  on  a  note  and  discount  on  a  note? 

10.  How  is  discount  on  a  note  computed? 

11.  What  entries  should  be  made  when  others  pay  their  notes  with  interest? 

12.  What  entries  should  be  made  when  we  pay  our  notes  with  interest? 

13.  What  entries  should  be  made  when  others'  notes  are  discounted? 

14.  What  entries  should  be  made  when  our  notes  are  discounted? 

15.  Give  the  rules  for  debiting  and  crediting  interest. 

16.  Give  the  rules  for  debiting  and  crediting  discount. 

17.  How  do  you  close  the  Interest  account  when  the  debit  side  is  the  larger? 

18.  (a)  Why  should  no  erasures  be  made  on  the  books?    (b)  How  should  corrections 
be  made? 

19.  Name  three  accounts  that  must  have  debit  balances,  unless  they  balance, 
and  give  the  reason  why. 

20.  Name  two  accounts  that  must  have  credit  balances,  unless  they  balance,  and 
give  the  reason  why. 

21.  How  should  the  Expense  account  be  closed  if  there  is  an  inventory? 

22.  How  should- the  Notes  Receivable  account  be  closed,  if  there  are  notes  unpaid? 

23.  How  should  the  Notes  Payable  account  be  closed  if  there  are  notes  unpaid? 

24.  What  is  the  object  of  the  sales  book?     How  is  it  posted? 

25.  What  is  the  object  of  the  purchase  book?     How  is  it  posted? 


CHAPTER  XII 
WHOLESALE  AND  RETAIL  PRODUCE  AND  FRUITS 

SET  IV 


The  work  of  this  set  covers  a  period  of  two  months,  April  and  May. 
The  books  will  be  posted  at  the  end  of  April  and  a  trial  balance  taken. 
At  the  end  of  May,  a  trial  balance  will  be  taken,  statements  will  be  made,  and 
the  books  closed. 

The  following  books  of  entry  will  be  used:  the  cash  book,  the  sales 
book,  the  purchase  book,  and  the  journal. 

In  using  the  new  books  of  entry,  the  sales  book  and  the  purchase  book, 
care  should  be  taken  to  follow  the  model  forms  given  in  the  last  chapter. 

Your  teacher  will  direct  you  as  to  whether  to  enter  your  transactions 
in  the  blank  books  or  on  loose  journal  sheets  first. 

Take  special  pains  to  do  neat,  accurate  work.  Do  not  erase.  Do  not 
mark  over  words  or  figures. 

TRANSACTIONS     FOR    APRIL 

April      1.     The  Student  begins  business  investing  cash,  $1000. 
Make  the  memorandum  and  the  entry. 

2.  Pay  rent  of  store  for  one  month,  $35. 

3.  Buy  of  J.  C.  Perry,  on  account: 

20  bbl.  Apples  at  $3.65 
15  bunches  Bananas  at  $1.65 
500  bu.  Potatoes  at  58ff 
Enter  in  the  purchase  book  only. 
Do  not  enter  the  items  bought. 

4.  Pay  the  Miller  Book  Co.  for  office  books,  $11.75. 
6.     Sell  C.  N.  Werner  on  account,  10  days: 

5  bunches  Bananas  at  $2.35 
125  bu.  Potatoes  at  69^ 
Enter  in  the  sales  book  only. 
The  items  sold  must  always  be  entered. 

84 


WHOLESALE  AND  RETAIL  PRODUCE  AND  FRUITS  85 

April      7.     Buy  of  Farr  Produce  Co.,  on  account: 
25  bx.  Oranges  at  $2.60 
12  bx.  Lemons  at  $3.25 

8.  Sell  T.  S.  Merton,  on  account:    N 

200  bu.  Potatoes  at  71^ 
5  bbl.  Apples  at  $4.25 

9.  Pay  the  Phoenix  Sign  Co.  $12.75  for  painting  a  sign  for  the 

business. 

10.  Buy  of  C.  S.  Parks,  on  account: 

15  bbl.  Cabbage  at  $2.05 
150  bu.  Onions  at  $1.15 
10  bbl.  Sweet  Potatoes  at  $3.25 

11.  Pay  J.   C.    Perry,  on  account,  $250. 
11.     Cash  sales  for  the  week,  $35.80. 

Cash  sales  are  given  weekly  to  avoid  a  large  number  of  entries  of  the 
same  kind. 

Enter  in  the  sales  book  and  in  the  cash  book  and  check  in  both  places. 

13.  Receive  of  C.  N.  Werner,  on  account,  $50. 

14.  Sell  D.  E.  Howe,  on  account,  30  days: 

10  bx.  Oranges  at  $3.25 
5  bx.  Lemons  at  $3.65 

15.  Receive  of  C.  N.  Werner  $48,  for  the  balance  of  the  invoice 

of  the  6th. 
Have  you  explained  this  entry  in  the  explanation  column  of  the  cash 
book?     Do  not  neglect  proper  explanations.     Books  of  entry  are  often- 
times worthless  as  evidence  if  the  explanations  are  not  properly  recorded. 

16.  Sell  J.  H.  Harris,  on  account: 

10  bbl.  Apples  at  $4.35 
150  bu.  Potatoes  at  72^ 
3  bbl.  Sweet  Potatoes  at  $3.85 

17.  Pay  the  Western  Coal  Co.  $15.60  for  3  tons  coal  at  $5..20. 

18.  Cash  sales  for  the  week,  $42.25. 
Have  you  made  two  entries? 

20.  Pay  C.  S.  Parks,  on  account,  $150. 

21.  Sell  C.  N.  Werner,  on  account,  10  days: 

12  bx.  Oranges  at  $3.20 
5  bbl.  Apples  at  $4.30 
2  bx.  Lemons  at  $3.75 

22.  Buy  of  the  Farr  Produce  Co.,  on  account: 

30  bx.  Oranges  at  $2.65 
15  bx.  Lemons  at  $3.20 
15  bbl.  Apples  at  $3.75 

23.  Receive  of  T.  S.  Merton,  on  account,  $75. 

24.  Give  Farr  Produce  Co.  your  note  at  15  days,  for  invoice 

of  the  7th,  $104. 


86  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

April    25.     Cash  sales  for  the  week,  $61.15. 

27.  Receive  of  J.  H.  Harris,  on  account,  $75. 

28.  Receive  of  T.  S.  Merton  his  note  at  10  days,  with  interest 
•    at  6%,  for  $50,  on  account. 

29.  Sell  G.  C.  Jacks,  on  account: 

5  bbl.  Cabbage  at  $2.45 
50  bu.  Onions  at  $1.65 
5  bbl.  Sweet  Potatoes  at  $3.90 

29.  Pay  J.  C.  Perry,  on  account,  $100. 

30.  Cash  sales  for  four  days,  $31.60.' 

30.     Pay  clerk's  salary  for  the  month,  $25. 

CLOSING    WORK 

1.  Balance  the  cash  book. 

2.  Close  the  sales  book  like  the  model  given  on  page  80. 

3.  Close  the  purchase  book  like  the  model  given  on  page  81. 

4.  Open  ledger  accounts,  three  on  a  page,  in  the  following  order: 

Student 

Merchandise 

Expense 

Interest  (To  be  used  in  May) 

Cash 

Notes  Receivable 

Accounts  with  customers,  in    the  order  that    they    appear    in 

the  sales  book 
Notes  Payable 
Accounts  with   creditors,    in    the   order    that     they    appear   in 

the  purchase  book 
Profit  and  Loss 

5.  Post  the  sales  book.  Do  not  post  the  entries  that  are  checked. 
Put  S  in  the  explanatory  column  of  the  ledger  and  the  page  of  the  sales 
book  in  the  folio  column  for  each  entry  posted.  Put  the  page  of  the 
ledger  in  the  folio  column  of  the  sales  book.  The  total  of  the  sales 
book  must  be  posted  and  the  page  put  in  the  folio  column. 

6.  Post  the  purchase  book.  Put  P  in  the  explanatory  column  of  the 
ledger  and  the  page  of  the  purchase  book  in  the  folio  column  for  each 
entry  posted.  Put  the  page  of  the  ledger  in  the  folio  column  of  the 
purchase  book.  Post  the  total  of  the  purchase  book  and  put  the  page  of 
the  ledger  in  the  folio  column. 

7.  Post  the  cash  book  in  the  usual  way.  Do  not  forget  to  post  the 
total  of  each  side  to  the  Cash  account  in  the  ledger. 

8.  Post  the  journal  in  the  usual  way.  The  due  date  of  each  note 
should  be  recorded  in  the  explanatory  column  of  the  Notes.  Receivable 
and  Notes  Payable  accounts  respectively. 

9.  Foot  the  ledger  accounts  in  pencil. 


WHOLESALE  AND  RETAIL  PRODUCE  AND  FRUITS  87 

10.  Take   a    trial    balance   of   differences.     Present   your   trial 
balance  and  your  books  to  your  teacher  for  approval. 

11.     Copy  the  trial  balance  in  the  blank  books. 

TRANSACTIONS    FOR    MAY 

Directions.  Use  the  same  pages  of  the  cash  book  as  for  April.  The 
balance  of  cash  for  April  must,  of  course,  be  brought  down  in  the  last 
column.  Use  the  same  page  of  the  purchase  book.  Use  new  pages  for  the 
sales  book  and  journal  respectively. 

May       1.     Pay  rent  of  store  for  May,  $35. 
2.     Buy  of  C.  D.  Riemer,  on  account: 
250  bu.  Potatoes  at  61j£ 
25  bbl.  Apples  at  $3.60 
2.     Cash  sales  for  two  days,  $46.35. 

4.  Sell  T.  S.  Merton,  on  account: 

5  bbl.  Cabbage  at  $2.40 
40  bu.  Onions  at  $1.70 

5.  D.  E.  Howe  pays  his  invoice  of  April  14,  $50.75. 

6.  Pay  Farr  Produce  Co.,  on  account,  $150. 

7.  Sell  L.  A.  Laabs,  on  account: 

8  bbl.  Apples  at  $4.15 
75  bu.  Potatoes  at  73j£ 

8.  Receive  of  T.  S.  Merton  $50.08  in  payment  of  his  note  of 

April  28,  and  interest. 

9.  Cash  sales  for  the  week,  $67.75. 

9.     Pay  your  note  favor  Farr  Produce  Co.,  $104. 

11.  Buy  of  C.  S.  Parks,  on  account: 

12  bunches  Bananas  at  $1.70 
15  bx.  Lemons  at  $3.20 

12.  Sell  D.  E.  Howe,  on  account: 

5  bx.  Lemons  at  $3.65 
75  bu.  Potatoes  at  74^ 
50  bu.  Onions  at  $1.45 

13.  Pay  J.  C.  Perry  in  full  for  his  April  account,  $37.75. 
This  amount  is  found  by  taking  the  difference  between  the  two  sides 

of  his  account  in  the  ledger. 

14.  Receive  of  G.  C.  Jacks  his  note  at  10  days,  with  interest  at 

6%,  for  $114.25,  for  invoice  of  April  29. 
Have  you  made  a  complete  explanation  in  your  journal  entry? 

15.  Buy  of  J.  C.  Perry,  on  account: 

500  bu.  Potatoes  at  59^ 

16.  Cash  sales  for  the  week,  $71.80. 


88  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

May     18.     Sell  C.  N.  Werner,  on  account,  30  days: 
5  bx.  Lemons  at  $3.85 
12  bbl.  Apples  at  $4.25 

19.  Give  your  note  at  10  days  with  interest  at  6%  to  J.  C. 

Perry,  on  account,  $200. 

20.  J.  H.   Harris,   pays  $88.05  in  full  for  his  April  account. 
How  is  this  amount  found? 

.20.     Sell  J.  H.  Harris,  on  account: 
150  bu.  Potatoes  at  75^ 

21.  Sell  L.  A.  Laabs,  on  account: 

5  bx.  Lemons  at  $3.85 
125  bu.  Potatoes  at  75j£ 

22.  Pay  gas  bill  for  April,  $7.65. 

23.  Cash  sales  for  the  week,  $53.45. 

25.  Receive  of  G.  C.  Jacks  $114.44  to  pay  his  note  of  the  14th 

and  interest. 
How  much  is  received  in  payment  of  the  note? 
How  much  is  in  payment  of  interest? 
Make  a  separate  entry  for  each. 

26.  Buy  of  C.  S.  Parks,  on  account: 

20  bbl.  Apples  at  $3.65 
15  bx.  Oranges  at  $2.55 
15  bx.  Lemons  at  $3.25 

27.  Receive  of  T.  S.  Merton,  in  full  of  account,  $118.25. 

28.  Pay  C.  D.  Riemer,  on  account,  $150. 

28.  Student  withdraws  $75  for   personal  use. 

29.  Sell  G.  C.  Jacks,  on  his  note  at  30  days,  with  interest  at 

6%: 
15  bbl.  Apples  at  $4.40 
8  bx.  Oranges  at  $3.15 
Receive  the  note  in  payment. 
Make  two  entries. 

30.  Pay  clerk's  salary,  $30. 

30.     Pay  the  Hassler  Transfer  Co.  $47.25  for  making  deliveries. 
30.     Cash  sales  for  the  week,  $64.40. 

CLOSING    WORK 

1.  Close  each  of  the  books  of  entry. 

2.  Post  the  sales  book,  purchase  book,  cash  book,  and  journal.     You 
will  have  to  open  up  the  new  accounts  after  Profit  and  Loss. 

3.  Take  a  trial  balance  of  differences. 

4.  Inventories,  May  31,  19 — : 
Merchandise,  per  schedule  on  file,  $205.45 
Expense:  1  ton  coal  $5.20 


WHOLESALE  AND  RETAIL  PRODUCE  AND  FRUITS  89 

5.  Make  a  Statement  of  Profit  and  Loss. 
Is  Interest  a  profit  or  a  loss?     Why? 

6.  Make  a  Statement  of  Assets  and  Liabilities. 
.7.     Close  the  following  accounts. 

a)  Merchandise 

b)  Expense 

c)  Interest 

d)  Profit  and  Loss 

e)  Student's  account 

8.  Close  all  other  accounts  that   do  not  balance  by   Balance.     Rule 
those  that  balance. 

9.  Take  a  proof  trial  balance. 


CHAPTER  XIII 
DISCOUNT  ON  PURCHASES  AND  ON  SALES 


Goods  are  frequently  bought  and  sold  on  such  terms  as  3/5,  2/10, 
n/30.  These  terms  mean  that  the  buyer  may  pay  the  invoice  at  any  time 
within  5  days  from  the  date  of  the  invoice  and  deduct  3  %,  or  at  any  time 
between  5  and  10  days  after  the  date  of  the  invoice  and  deduct  2%;  or 
pay  the  full  amount  of  the  invoice  within  30  days.  If  payment  is  made 
on  the  fifth  day  by  mailing  the  check  the  3  %  is  allowed,  or  if  the  check 
is  mailed  on  the  tenth  day  2%  is  allowed.  Companies  may  in  their  terms 
require  the  payment  to  reach  them  within  the  five  days  or  ten  days,  although 
this  is  rarely  done. 

When  goods  are  sold  on  terms  such  as  these  the  discount  is  not  deducted 
on  the  invoice  or  before  making  the  entry,  but  the  full  amount  of  the  invoice 
is  charged. 

If  B.  E.  Beech  sold  goods  on  March  8,  amounting  to  $57.75,  to  F.  A. 
Kagy,  on  the  terms,  2/10,  n/30,  F.  A.  Kagy  would  be  debited  for  the 
amount  of  the  invoice,  $57.75,  in  the  sales  book. 

If  F.  A.  Kagy  pays  his  invoice  on  March  16,  he  may  deduct  2%  before 
making  the  remittance.  Cash  amounting  to  $56.59  will  pay  an  account 
amounting  to  $57.75.  The  buyer,  F.  A.  Kagy,  must  be  credited  for  the 
full  amount  of  the  invoice  charged  to  him  when  he  made  the  purchase, 
$57.75.  Cash  cannot  be  debited  for  any  more  than  the  cash  received, 
$56.59.  The  discount,  $1.16,  must  be  debited  to  Merchandise  Discount 
to  show  the  allowance  made  to  the  buyer. 

As  an  entry  in  the  cash  book,  the  entry  must  be  made  on  the  theory 
that  the  buyer  paid  the  amount  of  the  invoice  and  that  the  business  paid 
him  back  the  amount  of  the  discount. 

On  the  books  of  the  seller,  B.  E.  Beech,  the  entry  would  be  made  as 

follows: 

Cash  Receipts 


sVfasLS,  /C 


90 


DISCOUNT  ON  PURCHASES  AND  ON  SALES  91 

Cash  Payments 


7asL-S'/&  /%£W^^g><^^^  /  /& 


On  the  books  of  the  buyer,  F.  A.  Kagy,  the  entry  would  be  made  as 

follows: 

Cash  Payments 

ill- 

Cash  Receipts 


tzst^f  /<J  //ptzbd-^.&LJ^cd^tn^sm^  2-  %&7f&f.(or  A3-€~e<>fLf^> 


/C 


Rule,  Debit  Merchandise  Discount  for  all  discount  allowed  to  others 
on  invoices  of  merchandise. 

Credit  Merchandise  Discount  for  all  discount  allowed  to  the  business  on 
invoices  of  merchandise. 

Merchandise  Discount  is  a  nominal  account.  The  debit  side  shows 
what  the  business  has  lost  by  allowing  discount;  the  credit  side  shows 
what  the  business  has  gained  by  paying  invoices  less  discount.  The  dif- 
ference must  be  a  loss  if  the  debit  side  is  the  larger  and  a  profit  if  the  credit 
side  is  the  larger. 

Merchandise  Discount  is  closed  in  the  same  manner  as  Interest  by 
entering  the  difference  between  the  two  sides  on  the  smaller  side.  If  the 
debit  is  the  larger,  Profit  and  Loss  in  red  ink  is  entered  on  the  credit 
side  and  transferred  to  the  opposite,  debit  side,  of  the  Profit  and  Loss  ac- 
count in  black  ink.  If  the  credit  is  the  larger,  Profit  and  Loss  in  red 
ink  is  entered  on  the  debit  side  and  transferred  to  the  opposite,  credit 
side,  of  the  Profit  and  Loss  account  in  black  ink. 

Exercise  25.     On  journal  paper  make  entries  for  the  following  trans- 
actions in  journal  form.     Make  the  entries  for  the  payment  of  invoices  less 
discount  as  compound  journal  entries  in  the  following  form: 
Cash  $343 

Mdse.  Discount  7 

To  W.  L.  Mann  $350 

Then  enter  the  cash  transactions  in  the  cash  book  in  the  way  they 
should  be  made  in  your  books. 

May       1.     Bought  an  invoice  of  goods  of  J.  A.  Jordan  on  the  terms, 
2/10,  n/30,  for  $525. 


92  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

8.     Sold  an  invoice  of  goods  to  B.  C.  Case  on  the  terms,   3/5, 
2/10,  n/30,  for  $280. 

11.  Paid  J.  A.  Jordan  for  invoice  of  the  1st,  less  $10.50  dis- 

count. 

12.  Bought  an  invoice  of  goods  of  H.  A.  Dalton  on  the  terms, 

1/10,  n/30,  for  $625. 

13.  Received  of  B.  C.  Case  cash  for  invoice  of  the  8th,  less 

discount. 
18.     Bought  an  invoice  of  goods  of  L.  M.  Myers  on  the   terms, 

2/10,  n/30,  for  $815. 
22.     Paid  H.  A.  Dalton  for  invoice  of  the  12th,  less  discount. 
24.     Sold  an  invoice  of  goods  to  C.  S.  Schwartz  on  the  terms, 

2/5,  1/10,  n/30,  for  $235. 
26.     Paid  L.  M.  Myers  for  invoice  of  the  18th,  less  discount. 
28.     Received  of  C.  S.  Schwartz  cash  for  invoice  of  the  24th, 
less  discount. 
Exercise   26.     On    journal    paper    enter    the    following    transactions, 
using  a  cash  book,  journal,  sales  book,  and  purchase  book. 

October     1.     S.  B.  Post  invested  cash,  $1800,  in  the  business. 

3.  Bought  an  invoice  of  goods  of  H.  E.  Steen,  on  account, 

20  days,  for  $278.25. 

4.  Paid  rent  of  store  for  one  month,  $40. 

6.  Sold  an  invoice  of  goods  to  B.  C.  Gradin  on  the    terms 

2/10,  n/30,  for  $167.50. 

7.  Paid  for  office  books  and  stationery,  $12.85. 

8.  Bought  an  invoice  of  goods  of  S.  N.  Jones  amounting 

to  $380.75,  and  gave  my  note  at  15  days,  with  inter- 
est at  6%,  in  payment. 
10.     Sold  an  invoice  of  goods  to  D.  E.  Darst  on  the  terms, 
3/10,  n/30,  for  $112.80. 

12.  Bought  an  invoice  of  goods  of  D.  E.    Closs  for  cash, 

$397.85. 

13.  Gave  H.  E.  Steen  my  note  at  15  days,  for  $278.25,  with 

interest  at  6  %,  for  invoice  of  the  3d. 

14.  Sold  an  invoice  of  goods  to  C.  E.  Wells  for  $132.50,  on 

account. 

15.  Received  cash,  $164.15,  for  an  invoice  of  goods  sold  to 

B.  C.  Gradin  on  the  6th,  less  $3.35  discount. 
18.     Bought  an  invoice  of  goods  of  C.  N.  Mills  on  the  terms, 
2/10,  n/30,  for  $136.75. 

20.  Received  cash  of  D.  E.  Darst  for  the  invoice  sold  him 

on  the  10th,  less  discount,  $3.38. 

21.  Sold  B.  C.  Gradin  an  invoice  of  goods,  on  account,  for 

$171.25,  and  received  his  note  at  30  days,  for  $100 
in  part  payment. 


DISCOUNT  ON  PURCHASES  AND  ON  SALES  93 

24.  Paid  my  note  of  the  8th,  favor  S.  N.  Jones,  and  interest. 
This   note  was  due  on    the   23d,  which  was  Sunday.     Notes  due  on 

Sunday  may  be  paid  on  the  next  business  day  in  most  states. 

25.  Sold  an  invoice  of  goods  to  S.   N.  Bond,  on  account, 

30  days,  for  $178.95. 

26.  Bought   an   invoice   of   goods   of   D.    E.    Closs,    on   the 

terms,  3/5,  2/10,  n/30,  for  $127.25. 

27.  Paid  C.  N.  Mills  cash  for  invoice  of  the  18th,  less  discount. 

28.  Paid   my   note   of   the   13th,   favor   H.    E.    Steen,   with 

interest. 

29.  B.  C.  Gradin  gave  his  note  at  30  days  for  $50, on  account. 
31.     Paid  D.  E.    Closs    cash   for   invoice   of   the   26th,    less 

discount. 

1.  Open  ledger  accounts  on  ledger  paper,  putting  four  accounts  on  a 
page. 

2.  Post  the  entries. 

3.  Take  a  trial  balance. 

4.  Make  a  statement  of  Profit  and  Loss.  Inventory  of  merchandise, 
$632.50. 

5.  Make  a  statement  of  Assets  and  Liabilities. 

6.  Close  the  ledger. 

7.  Make  a  proof  trial  balance. 


CHAPTER  XIV 
THE  BANK  ACCOUNT 


Modern  business  is  carried  on  largely  without  the  use  of  actual  money. 
Not  only  has  business  become  a  credit  business  but  payments  are  made  by 
means  of  instruments  of  credit.     A  bank  is  a  credit  institution. 

A  large  part  of  the  payments  made  in  the  wholesale  and  jobbing  trade 
are  by  means  of  orders  on  banks.  A  smaller  per  cent  of  payments  in  the 
retail  trade  are  made  in  the  same  way. 

An  order  on  a  bank  is  nothing  more. than  a  transfer  of  part  of  one 
person's  credit  at  the  bank  to  some  one  else.     It  is  called  a  check. 

Chas.  Graham  has  an  account  at  the  bank.  He  owes  James  Paxton. 
He  orders  the  bank  in  writing  to  pay  the  amount  to  James  Paxton.  By 
doing  this  the  bank  credit  is  transferred  from  Chas.  Graham  to  James 
Paxton. 

Advantages  of  a  Bank  Account.  There  are  many  advantages  derived 
from  having  a  commercial  deposit  in  a  bank,  but  the  chief  ones  are  as 
follows: 

1.  A  bank  account  makes  it  possible  for  a  business  to  keep  its  funds 
in  a  safe  place  and  to  draw  them  out  at  any  time. 

2.  It  enables  a  business  to  pay  its  bills  by  means  of  checks. 
Checks  are  desirable  for  the  following  reasons: 

a)  Payment  by  check  is  a  much  safer  method  thanpaymentin  money. 

b)  Canceled  checks  are  returned  to  the  depositor  at  the  end  of 
each  month.  They  thus  serve  as  receipts,  as  the  name  of  the  party  to 
whom  payment  has  been  made  must  be  indorsed  on  it  before  the  check 
can   be  cashed. 

c)  Checks  furnish  the  best  data  from  which  to  make  the  entries 
and  prove  up  the  cash. 

3.  A  bank  is  the  best  medium  through  which  checks,  notes,  and 
drafts  may  be  collected  for  a  depositor. 

4.  A  good  bank  account  gives  standing  to  a  business  that  will  assist 
very  much  in  obtaining  credit  and  in  borrowing  money. 

How  to  Open  a  Bank  Account.  Many  of  the  smaller  banks  will  open 
commercial  or  checking  accounts  with  any  one  that  makes  a  reasonable 
deposit.     But  the  larger  banks  insist  on  an  introduction  from  some  one 

94 


THE  BANK  ACCOUNT 


95 


known  to  the  bank.  They  also  insist  on  an  opening  deposit  of  a  certain 
sum  and  that  the  depositor  maintain  at  all  times  that  sum,  or  more,  in  his 
account.  The  details  of  opening  an  account  are  usually  attended  to  by  an 
assistant  cashier  of  the  bank. 

Signature  Card.  After  these  formalities  have  been  completed  a 
signature  card  must  be  filled  in.  The  depositor  should  sign  his  name  on  this 
card  just  as  he  expects  to  sign  it  on  checks.  The  following  is  a  common 
form  of  a  signature  card: 

Signature  Card 


National  Exchange  Bank 


AUTHORIZED  SIGNATURE  OF 


Name. 


ggg^gS^k2, 


'^rzsr?v^d>- 


Home  Address  _Z^ZZ<=£I 


^LzZZzL&t 


Business 


Business 


Address    UZ&  K=Xt^^A£/J^^J/r 


Dale 


Remarks. 


This  signature 
card  is  a  valuable 
card  and  is  usually 
kept  on  file  by  the 
paying  teller  so 
that  he  may  con- 
sult it  in  cases  of 
forgery  or  of  doubt- 
ful signature. 

How  to  Make 
aDeposit.  On  mak- 
ing a  deposit,  each 
depositor  should 
make  out  a  depos- 
it ticket  furnished 
by  the  bank.  This 
ticket  contains  de- 
tails of  the  depos- 
it and  a  place  for 
any  charges  onout- 

of-town  checks  deposited.     A  simple  form  to  be  used  in  the  practice  work  is 
as  shown  on  page  96. 

Deposit  Ticket.  The  papers  deposited  may  be  checks  on  the  bank  in 
which  the  deposit  is  made,  checks  on  other  banks  of  the  same  city  or  on 
banks  of  other  cities,  express  money  orders,  postal  money  orders,  or  bank 
exchange.  (Bank  exchange,  or  a  bank  draft,  is  an  order  of  one  bank 
on  a  bank  of  New  York,  Chicago  or  some  other  large  city.  It  is  every- 
where accepted  as  cash.)  For  the  convenience  of  banks  the  deposit  ticket 
is  frequently  printed  so  as  best  to  give  this  information.  These  are  in 
many  different  forms.  A  form  used  by  many  banks  is  as  shown  on 
page  97. 

The  Pass  Book.  The  deposit  ticket,  with  the  money  and  checks,  is 
handed  to  the  receiving  teller.  He  counts  the  money  and  checks  the 
correctness  of  the  checks  and  of  the  total.  He  then  enters  the  amount  of 
the  deposit  in  the  pass  book  as  shown  on  page  96. 


96 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Deposit  Ticket 


National  Exchange  Bank 


OF   MILWAUKEE 


POSITED     FDR    ACCOUNT    OF 


if/ASA 


^£2^222^L^L 


^cjic^y  ,j~     ifl  — 


pleAse   list  checks  SEPARATELY   and  see 

THAT  THEY  ARE  PROPERLY   INDORSED 


Cold. 


Silver. 


Jl-ZZ 


This  entry  is  a  receipt  for  the 
money  and  checks  deposited  and 
should  be  examined  by  the  de- 
positor before  leaving  the  bank. 

Should  the  depositor  forget  his 
pass  book,  he  should  make  out 
two  deposit  tickets,  one  of  which 
the  receiving  teller  will  stamp 
Duplicate,  sign  his  name  or 
initials,  and  return  to  the  de- 
positor. This  duplicate  should 
be  taken  to  the  bank  when  the 
next  deposit  is  made  and  the  de- 
posit entered  in  the  pass  book. 

The  Check  Book.  A  bank  will 
pay  out  money  from  a  deposi- 
tor's account  only  on  a  written 
order.  A  check  is  a  written  or- 
der on  a  bank  to  pay  a  certain 
sum  of  money  to  the  order  of  a 
third  person  or  to  bearer. 

Each  bank  furnishes  its  de- 
positors with  a  book  contain- 
ing stubs,  with  checks  attached 

by  a  perforation,  so  that  they  can  easily  be  torn  out.  This  is  called  a  check 

book.  pASS  Book  Entry 


Currency. 


Checks . 


3?  T/.^^^j- 


l££ 


^z 


&f 


/  ZS3o 


m 


7^ 


7° 


Each     depositor      a\  /u  ,  . 

should    keep     his     ac-  c/JZ4>\  J~  cZ^W^  \3  (p  6 

count  with  the  bank 
in  such  a  way  that  he 
may  know  at  any  time  just  how  much  he  has  on  deposit.  The  pur- 
pose of  the  stub  from  which  the  check  is  detached  is  to  show  a  detailed 
memorandum  of  the  payment,  and  to  keep  the  account  with  the  bank. 
For  a  small  business  or  for  the  private  individual,  the  best  method  is  to  add 
the  amount  of  each  deposit  made  and  to  subtract  the  amount  of  each  check 
drawn.  This  method  is  illustrated'  in  the  page  of  a  two-on  check  book 
shown  on  pages  98  and  99.  Another  method  of  keeping  the  bank' account, 
preferred  by  many  accountants,  is  illustrated  on  page  i  of  the  appendix. 

The  back  of  preceding  check  stubs  opposite  should  be  used  for  details 
of  deposits,  collections,  and  charges,  if  the  items  are  not  great  in  number. 
The  back  of  the  check  stub  opposite  to  where  the  deposit  is  added  should 
show  the  details  of  the  deposit.     (See  illustration  on  page  100  ) 


THE  BANK  ACCOUNT 


97 


Things  to  be  Observed  in  Writing  Checks  : 

1.  Always  fill  in  the  check  stub  first. 

2.  Do  not  leave  blank  spaces,  but  fill  them  in  with  a  wavy  line. 

3.  The  amount  should  always  be  written  close  to  the  dollar  sign. 

4.  If  there  are  no  cents  in  the  amount,  it  should  be  shown  by  filling 
in  two  ciphers. 

5.  The  amount  in  words  should  begin  to  the  extreme  left  of  the  line. 

6.  The  signature  should  always  be  the  same. 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


J~0  O  O 


oL 


'^22' 


To. 

Discount 


Amount 


^^<^^^  /a,  /<?- 


?J  7 


7.  No  erasures  or  alterations  should  be  permitted  on  checks.  In  a 
small  business  where  the  pro- 
prietor signs  all  checks,  the 
best  plan  to  follow  is  to  destroy 
all  imperfect  checks  and  take 
one  out  of  the  back  part  of  the 
check  book  and  rewrite.  This 
plan  should  be  followed  in  your 
practice  work. 

In  a  business  where  the  checks 
are  signed  by  an  agent  such  as  a 
bookkeeper,  cashier,  ortreasurer, 
no  imperfect  or  incorrect  checks 
should  be  destroyed.  They 
should  be  marked  or  stamped 
Void  and  attached  to  the  stub 
so  as  to  show  an  auditor  what 
became  of  that  particular  check 
number. 

Indorsements.  Checks  may 
be  indorsed  in  the  same  way  as 
notes.  The  special  indorsement 
is  the  one  most  commonly  used. 
It  should  always  be  used  if  a 
check  is  to  be  sent  through  the 
mail.  A  blank  indorsement 
may  be  used  if  the  check  is  to 
be  deposited  at  the  bank  at  once, 
otherwise,  a  special  indorsement 
is  better. 

The  Bank's  Statement  of  Account.  At  the  end  of  each  month  the 
bank  returns  to  the  depositor  his  canceled  checks,  and  a  statement  of  his 
account  for  the  month.  This  statement  may  be  in  any  one  of  a  number 
of  forms.  Some  banks  simply  list  the  amounts  on  an  adding  machine 
slip  and  return  this  slip  with  the  checks  to  the  depositor.  It  shows  the 
deposits,  the  checks,  and  the  balance. 

Other  banks  list  the  checks  separately  or  the  total  checks  returned 
on  the  right  side  of  the  pass  book  and  balance  it.  This  is  called  writing 
up  the  pass  book  but  is  used  by  the  smaller  banks  only. 

The  most  common  practice  among  the  larger  banks  is  to  give  each 
depositor  a  monthly  statement  of  his  account  either  on  a  separate  sheet  or 
on  the  envelope  in  which  the  canceled  checks  are  placed.  The  statement 
illustrated  on  page  101  is  a  common  form. 


vJ^tLryfa&s.  &&£L  a 


Discount . 


l^o 


L&2A 


THE  BANK  ACCOUNT  99 

Reconciling  the  Bank's  Statement.     It  frequently  happens  that  the 


No._Z 


National  Exchange  Bank 


asgae  ^  .^>^^^;z^;^—  *  ^ 


tz^n^zf  '~7*:»  ^  ~^~^ " ' 1        Dollars 


No._JL 


National  Exchange  Bank 


PAY  TO  THE 
ORDER  OF. 


_Dollars 


balance  shown  by  the  bank's  statement  does  not  agree  with  the  balance 
shown  by  the  depositor's  check  book.  This  is  usually  due  to  the  fact 
that  some  checks  written  near  the  close  of  the  month  have  not  yet  been 
paid  by  the  bank,  hence,  they  are  not  included  in  the  statement.  To 
explain  this  difference  is  to  reconcile  the  bank  account. 

The  checks  should  first  be  arranged  in  numerical  order  and  compared 
with  the  check  stubs.  A  red  ink  check  mark  or  0.  K.  should  be  placed 
on  the  check  and  on  the  stub. 

The  missing  checks  should  be  listed  by  number  and  totaled.  This 
total  should  then  be  subtracted  from  the  bank's  balance  as  shown  by 
the  bank's  statement.  The  difference  should  equal  the  balance  as  shown 
by  the  check  book.     A  record  of  this  reconciliation  may  be  kept  on  the  left 


100 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


check  stub,  or,  if  the  number  of  checks  unpaid  is  large,  it  may  be  kept  in 

Details  of  Deposit  a   special    Reconciliation 

A\  Book. 


J.J-o 
So  — 

/2-S  — 


December    15. 
16. 

18. 


Exercise  27.  Rule 
two  sheets  of  paper 
lengthwise  with  two 
checks  and  two  stubs  on 
each. 

Write  the  checks  and 
make  the  necessary  re- 
cords like  the  model 
forms  given  in  the  text. 
The  check  book  is  that 
of  C.  H.  Oliver  and  the 
checks  should  be  signed 
by  him. 


n/30 


3¥J~.7dT 

Deposited  $3000,  in  bills. 

Drew  check  No.  1,  in  favor  of  C.  N.  Cable,  for  printing 

letter  and  bill  heads,  $6.75. 
Drew  check  No.  2,  in  favor  of  the  Bender  Coal  Co., 
for  10  tons  of  coal  at  $5.25. 
Forward  the  balance  to  the  top  of  the  second  sheet. 

20.     Deposited  bills,   $20,  silver,  $25,  J.  B.  Grant's  check 
for  $35.75,  and  L.  C.  Dow's  check  for  $42.80. 
Drew  check  No.  3,  in  favor  of  Ladd  &  Son  for  invoice 
of  the  11th,  amounting  to  $537.25,  less  2  %  discount. 
Drew  check  No.  4,  in  favor  of  F.  A.   Wright  for  two 
week's  salary,  $25. 
Exercise  28.     On  sheets  of  paper  make  out  the  papers  called  for. 
1.     Make  the  invoice  for  the  following: 
On  January  10,  sold  G.  C.  Burns,  Appleton,  Wis.,  on  the  terms,  2/10, 


22. 


24. 


8  bx.  Wool  Soap  at  $3.75 
10  bbl.  White  Star  Flour  at  $4.35 
15  bbl.  Syracuse  Salt  at  $1.65 

2.  Make  a  receipted  invoice  for  the  following: 

On  May  8,  sold  C.  S.  Silber,  Columbus,  Ohio,  for  cash,  less  3%: 
12  Oak  Dining  Tables  at  $15.75 
15  Turkish  Rockers  at  $28.75 
5  Mahogany  Library  Tables  at  $13.75 
24  Oak  Desk  Chairs  at  $3.15 

3.  From  the  following  data,  write  a  promissory  note: 


THE  BANK  ACCOUNT 


,101 


Your  place;  current  date;  time,  60  days;  face  of  note,  $315;  payable 
at  First  National  Bank;  interest,  6%;  maker,  Student;  payee,  L.  C.  Stern. 
Show  the  due  date  of  the  note. 

4.     From  the  following,  write  a  promissory  note: 

Chicago,  111.;  Jan.  31;  time,  3  months;  face  of  note,  $1175.85;  payable 
at  Merchants  Bank;  interest  at  7%;  maker,  Brown  &  Co.,  by  its  president, 
C.  G.  Brown;  payee,  B.  C.  Goodwin.    Show  the  due  date. 

Bank  Statement  of  Account 


-/^-*2^ 

// 

VOUCHERS 

RETURNED 

\                l      '                                    IN    ACCOUNT    WITH 

National  Exchange  Bank 

OF  MILWAUKEE         ^_- 

STATEMENT    OF    ACCOM  NT  .  FOR    ( S?>f~n      19 

Day 

CHECKS 

Day 

CHECKS 

Day 

MEMO 

DEPOSITS 

3 

V 

Z^> 

Balance 

3/y 

7* 

f» 

/ 
/ P 

, 

/o 

2-/S 

/ 

Zo 

/o 

/J  c 

Sq 

ZZ_ 

TrtffZ£&<>C<sr. 

ff 

Zs 

Ar 

72 

fa 

zz 

/  /<S 

Cs 

/f 

ZzL 

7s 

2S 

72- 

3S 

>/ 

46 

/ 

/ 

zs 

/  Z 

ZJ 

2-7 

tf 

So 

r 
Zf 

2/ 

In 

2a 

/  £ 

<fa 

7 

.In 

S-Q 

f/<? 

%a 

/ 
^  /  / 

V 

C  // 

2J 

H.\l.A\r.K 

>07 

<?j 

7— 

, 

CHAPTER  XV 

WHOLESALE  GROCERY 

SET  V 

The  Object  of  this  set  is: 

1.  To  give  the  pupil  further  drill  in  the  use  of  the  books  of  entry 
and  in  the  various  steps  necessary  in  keeping  a  continuous  set  of  books. 

2.  To  illustrate  a  simple  partnership  business. 

3.  To  give  the  pupil  practice  in  making  out  the  common  business 
papers. 

4.  To  give  him  practical  work  in  dealing  with  the  bank  and  in  keeping 
the  necessary  records. 

The  transactions  are  so  arranged  that  the  practice  work  may  be  omitted 
if  the  teacher  desires.  But  the  writing  of  the  business  papers  and  the 
practice  work  with  the  bank  are  strongly  recommended. 

If  there  is  no  bank  in  connection  with  the  school,  the  entries  in  the 
pass  book  may  be  made  by  the  teacher  or  by  pupils  designated  for  that 
work  from  time  to  time. 

Special  Instructions.  All  cash  received  is  in  the  form  of  school  currency. 
This  is  called  Incoming  Currency.  When  the  business  receives  cash,  it 
is  taken  out  of  Incoming  Currency  and  placed  in  the  Cash  Drawer.  When 
a  deposit  is  made,  the  currency  is  taken  out  of  the  Cash  Drawer  and  placed 
with  the  deposit  ticket  in  the  pass  book. 

All  payments  are  made  by  check.  As  soon  as  the  check  is  written 
and  entered,  it  should  be  torn  out  of  the  check  book  and  placed  in  the 
Bank  envelope. 

All  invoices,  receipts,  and  notes  should  be  made  out  and  entered,  and 
then  put  in  the  Outgoing  Papers  envelope. 

You  should  now  be  sufficiently  accurate  and  exact  in  your  work  that 
it  should  not  be  necessary  to  enter  the  transactions  on  loose  sheets  first. 
The  cash  book  may,  however,  be  entered  on  loose  sheets  first  if  the  teacher 
desires. 

Begin  a  new  page  in  each  book  of  entry. 

Twenty-five  price  lists  are  provided  and  may  be  used  or  not  as  the 
teacher  desires. 

Each  pupil  may  be  given  work  in  business  correspondence  in  connection 

102 


WHOLESALE  GROCERY 


103 


with  his  bookkeeping  work, 
goods,    to   answer  inquiries, 


He  may  be  required  to  write  letters  ordering 
to   write  letters   making  remittances,  and  to 


Cost  and  Selling  Price  Lists,  Set  V 

AJRTICLES 

QUAN- 
TITY 

COST 

SELLING  PRICE  LISTS 

1      !    2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

Baking  Powder 

Case 
Doz. 
Doz. 

2.10 
.70 

.85 

2.75 

.85 

1.10 

2.80 

.90 

1.27 

2.70 

.95 

1.22 

2.85 
1.00 
1.26 

2.90 
1.05 
1.09 

2.95 

.86 

1.28 

3.00 
1.04 
1.01 

2.78 

.87 

1.30 

2.86 
1.03 
1.20 

2.83 

.88 
1.25 

2.68 
1.02 
1.15 

2.71 

.89 

1.24 

2  67 

Canned  Corn 

1  01 

Canned  Peaches 

1  18 

Coffee 

Lb. 
Bbl. 
Case 

.25 
3.65 

1.75 

.35 
4.50 
2.15 

.42 
4.75 
2.08 

.30 
4.60 
2.12 

.36 
4.55 
2.01 

.44 
4.65 
2.00 

.38 
4.70 
2.18 

.36 
4.40 
2.02 

.35 

4.56 
2.10 

.43 

4.48 
2.03 

.31 
4.45 
2.07 

.37 

4.57 
2.17 

.39 
4.66 
2.20 

.45 

Flour 

4  40 

K.  Cleanser 

2  16 

Macaroni 

Case 
Case 
Case 

2.05 
4.50 
1.90 

2.55 
5.40 
2.30 

2.48 
5.56 
2.58 

2.36 
5.66 
2.25 

2.45 
5.63 
2.32 

2.44 
5.37 
2.33 

2.60 
5.60 
2.60 

2.49 
5.33 

2.57 

2.37 
5.62 
2.71 

2.53 
5.36 
2.64 

2.43 
5.55 
2.68 

2.65 
5.69 
2.65 

2.52 
5.57 
2.69 

2  38 

Matches 

5  24 

Oat  Flakes 

2  63 

Raisins 

Case 
Box 
Case 

3.20 
2.35 

1.65 

3.95 
2.85 
1.95 

4.00 
2.95 
1.93 

4.15 
2.90 
2.03 

4.10 
3.05 
1.99 

4.05 
3.10 
2.12 

4.21 
2.93 
2.01 

4.06 
3.07 
2.05 

4.24 
2.89 
2.06 

4.04 
3.09 
1.94 

4.11 
2.94 
2.13 

4.18 
2  80 
2.02 

4.12 
3.08 
2.10 

4  25 

Soap 

2  88 

Starch 

2.07 

Sugar 

Lb. 
Lb. 
Case 

.04 

.35 

2.60 

.05 

.45 

3.15 

.05^ 

.49 

3.Q2 

.05 

.39 

3.27 

.05| 
.48 
3.08 

.06 

.41 

3.24 

.05 

.46 

2.96 

.06 

.48 

3.00 

.05^ 

.40 

2.97 

.05 

.50 

3.09 

.05£ 
.45 
3  05 

.06 

.47 

3  ?6 

.05 

.42 

3.21 

.06 

Tea 

.51 

W.  Biscuit 

3.28 

Cost  and  Selling  Price  L 

ISTS, 

Set  V,  (Continued] 

ARTICLES 

QUAN- 
TITY 

COST 

SELLING  PRICE  LISTS,  (CONTINUED) 

14 

15    |  16 

17 

18   |  19    |  20    I  21    |  22   |   23    1  24    |   25 

Baking  Powder 

Case 
Doz. 
Doz. 

2.10 
.70 

.85 

2.72 

1.10 

.94 

2.76 
.84 

1.25 

2.65 

.83 

1.29 

2.81 

1.11 

.97 

2.69 
1.09 
1.17 

2.88 

1.12 

.96 

2.73 
1.08 
1.16 

2.84 

1.13 

.98 

2.79 
1.07 
1.14 

2.68 
1.14 
1.19 

2.85 

1.06 

.99 

2.74 

1.15 

Canned  Peaches 

.95 

Coffee 

Lb. 
Bbl. 
Case 

.25 
3.65 
1.75 

.40 
4.52 
2.09 

.38 
4.49 
2.04 

.32 

4.64 
2.23 

.28 
4.35 
2.25 

.31 
4.46 
2.22 

.33 
4.51 
2.13 

.39 
4.61 
2.19 

.32 
4.53 
2.14 

.40 

4.62 
2.30 

.34 
4.54 
2.21 

.29 
4.63 
2.06 

.41 

Flour 

4.30 

K.  Cleanser 

2.11 

Macaroni 

Case 
Case 
Case 

2.05 
4.50 
1.90 

2.51 
5.64 
2.66 

2.46 
5.45 
2.55 

2.30 
5.67 
2.67 

2.41 
5.58 
2.56 

2.32 
5.34 
2.65 

2.40 
5.68 
2.62 

2.54 
5.50 
2.50 

2.47 
5.38 
2.54 

2.39 
5.59 
2.61 

2.45 
5.30 
2.40 

2.42 
5.61 
2.59 

2.35 

Matches 

5.25 

Oat  Flakes 

2.45 

Raisins 

Case 
Box 

Case 

3.20 
2.35 
1.65 

4.14 
3.12 

1.92 

4.09 
2.75 
2.14 

4.02 
3.02 
1.95 

4.20 
2.96 
2.08 

4.13 

2.99 
1.98 

4.03 
2.86 
1.90 

4.17 
2.98 
2.04 

4.07 
2.91 
1.96 

4.22 

2.87 
2.11 

4.08 
3.04 
2.15 

4.19 
2.92 
1.97 

4.25 

3.15 

Starch 

2.09 

Sugar 

Lb. 
Lb. 
Case 

.04 

.35 

2.60 

.05£ 
.46 
3.17 

.06 

.50 

3.12 

.052l 

.49 

3.10 

.06 

.51 

3.29 

.05| 
.43 
3.22 

.05 

.54 

2.98 

.05£- 
.55 
3.11 

.06 

.52 

3.18 

.05 

.48 

2.95 

.05| 
.45 
3  ?3 

.06 

.53 

3  16 

.05^ 

Tea 

.44 

W.  Biscuit 

3.25 

acknowledge  receipt  of  remittances, 
given  at  the  close  of  this  chapter. 


Model  letters  of  different  kinds  are 


TRANSACTIONS    FOR    JUNE 

June  1.  .  Student  and  Robert  Parker  have  today  formed  a  copartner- 
ship under  the  firm  name  of  Student  and  Parker.  Each  partner  invests 
cash,  $2000.     They  agree  to  share  profits  and  losses  equally. 

Make  a  memorandum  of  this  agreement  in  the  journal.  The  entries 
must  be  made  in  the  cash  book.  An  account  must  be  kept  with  each  part- 
ner to  show  his  interest  in  the  business.  Make  an  entry  in  the  cash  book 
for  each  partner's  investment. 

Take  the  currency  from  the  Incoming  Currency  and  place  it  in  the 
Cash  Drawer. 


104  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Deposit  $4000  in  the  bank.  Make  out  a  deposit  ticket.  Place  the 
deposit  ticket  and  the  currency  in  the  pass  book  and  take  it  to  the  bank. 
Your  teacher  will  make  the  entry  in  the  pass  book  or  direct  some  pupil 
to  do  it. 

Record  the  deposit  on  the  left  check  stub  and  add  it  to  the  right  check 
stub  like  the  illustrations  on  pages  98  and  100,  or  the  method  illustrated 
on  page  ii  of  the  appendix  may  be  used. 

No  entry  should  be  made  in  the  cash  book  for  a  deposit.     Why? 

June  1.  Lease  a  store  building  at  240  Grand  St.,  of  L.  M.  Boyce, 
at  $30  per  month. 

Make  a  memorandum  of  this  agreement  in  the  journal.  Write  a  check 
to  pay  for  one  month's  rent.  Fill  out  stub  No.  1.  Write  check  No.  1  and 
detach  it. 

Make  the  entry  in  the  cash  book. 

Place  the  check  in  the  Bank  envelope.  In  actual  business  the  check 
would  be  given  to  L.  M.  Boyce,  who  would  indorse  it  and  cash  it  or  deposit 
it.  The  check  would  be  kept  at  the  bank  until  the  end  of  the  month  when 
it  would  be  returned  to  you  with  the  bank's  statement.  The  Bank  envelope 
represents  the  bank's  file  of  checks. 

June  2.     Buy  of  the  Hart  Canning  Co.,  Hart,  Mich.,  on  account: 

150  doz.  Canned  Corn 

120  doz.  Canned  Peaches 
Make  the  entry  in  the  purchase  book.     Use  but  one  line. 

June  3.     Buy  of  E.  B.  Webster  &  Co.,  Chicago,  on  account: 
50  cases  Macaroni 
75  cases  Oat  Flakes 
40  cases  Baking  Powder 
25  cases  Raisins 
45  cases  Starch 

June  4.     Sell  L.  N.  Noyes,  City,  on  account: 
20  doz.  Canned  Corn 

5  cases  Raisins 
12  cases  Oat  Flakes 
Make  out  the  invoice  at  the  selling  price.     Should  it  be  receipted? 
Why? 

Enter  in  the  sales  book. 

June  5.     Buy  of  C.  N.  Ray  &  Co.,  New  York,  for  cash: 
1200  lb.  Coffee 
840  lb.  Tea 
Make  the  entry  in  the  purchase  book. 
Write  the  check  to  pay  for  this  invoice. 
Make  the  entry  in  the  cash  book  debiting  C.  N.  Ray  &  Co. 


WHOLESALE  GROCERY  105 

June  6.     Sell  J.  E.  Fritz,  City,  on  account: 
36  doz.  Canned  Peaches 
8  cases  Baking  Powder 
12  cases  Starch 
Make  out  the  invoice  and  make  the  entry. 
June  8.     Receive  of  L.  N.  Noyes,  cash,  on  account,  $50. 
Take  the  currency  from  the  Incoming  Currency  and  put  it  in   the 
Cash  Drawer.     You  must  do  this  each  time  cash  is  received. 
Make  the  entry.     Give  him  a  receipt. 
June  8.     Buy    of    the    Baum    Stationery    Co.,     blank    books     and 

stationery,  for  cash,  $16.75. 
Write  a  check  in  payment.     Make  the  entry. 
What  did  you  do  with  the  check? 

Did  you  bring  the  balance  forward  from  check  stub  No.  2?  Have  you 
subtracted  the  amount  of  this  check  from  it? 

June  9.     Buy  of  B.  J.  Johnson  &  Co.,  Milwaukee,  on  the  terms,    2/10, 
n/30:  150  bx.  Soap 
75  cases  K.  Cleanser 
Make  the  entry. 
June  10.     Sell  S.  D.  Felton,  Peoria,  111.,  for  cash: 

120  lb.  Coffee  at  35^ 
Make  out  the  invoice  and  receipt  it. 

This  is  not  a  sale  to  a  regular  customer.  Enter  it  in  both  the  sales 
book  and  in  the  cash  book.    Check  it  in  both  places. 

Take  the  currency  from  the  Incoming  Currency  and  place  it  in  the 
Cash  Drawer. 

June  11.     Pay  the  Hart  Canning  Co.  $150  on  account. 
Write  the  check  and  make  theentry. 
June  12.     Sell  J.  W.  Roth,  Tiffin,  Ohio,  on  account: 
10  cases  Raisins 
7  cases  Baking  Powder 
30  doz.  Canned  Corn 
18  doz.  Canned  Peaches 
Make  out  the  invoice  and  make  the  entry. 
June  13.     Deposit  $50. 

Make  out  the  deposit  ticket  and  take  it  with  the  currency  to  the  bank 
for  entry. 

Make  the  necessary  records  in  the  check  book. 
June  15.     Sell  Chas.  Orth,  City,  on  account: 
240  lb.  Tea  at  45^ 
360  lb.  Coffee  at  35j£ 
Make  out  the  invoice  and  make  the  entry. 
First  Report.     Prove  cash  and  make  a  report. 

To  Prove  Cash.  Add  in  pencil  each  side  of  the  cash  book  and  find 
the  difference.  This  is  the  cash  balance.  Do  not  rule  the  cash  book. 
In  actual  business  cash  is  proved  daily.     In  many  business  houses  it  is  also 


106  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

balanced  daily.  But  the  number  of  daily  cash  transactions  in  this  prac- 
tice work  is  so  few  that  is  is  not  necessary  to  prove  cash  and  balance 
it  daily.  Count  the  currency  in  the  Cash  Drawer.  The  amount  in  the 
Cash  Drawer  and  the  balance  in  the  bank  after  adding  the  last  deposit 
should  equal  the  cash  balance. 

If  the  cash  does  not  prove,  compare  the  cash  received  with  the  amount 
deposited  and  the  amount  on  hand  in  the  cash  drawer.  Compare  the 
check  stubs  with  the  cash  payments. 

Take  a  report  blank  from  your  envelope.     Fill  out  the  cash  proof. 

Take  the  papers  from  your  Outgoing  Papers  envelope  and  put  all 
the  paid  invoices  together  and  all  the  unpaid  together.  Arrange  each  in 
the  order  of  the  dates.  List  the  paid  invoices  on  the  report  and  find  the 
total.  List  the  unpaid  invoices  and  find  the  total.  Do  the  same  with 
the  receipts.     List  the  checks  from  the  Bank  envelope  and  find  the  total. 

Hand  your  report,  your  Outgoing  Papers  envelope,  and  your  Bank 
envelope  to  your  teacher  for  correction.  He  will  return  your  Bank  envelope 
with  the  checks  to  you.     The  other  papers  will  be  kept  if  they  are  correct. 

You  are  now  expected  to  make  out  the  necessary  papers  and  to  make 
the  entries  and  records  for  each  transaction  without  any  special  instructions. 
Every  new  transaction  will  be  explained. 

June  16.  Receive  of  J.  E.  Fritz  his  note  for  $60,  payable  10  days 
after  date,   with  interest  at  6%. 

Make  the  entry  in  the  journal. 

What  account  should  be  debited? 

What  account  should  be  credited? 

June  17.     Buy  of  C.  N.   Ray  &  Co.,  New  York  on  the  terms  2/10, 
n/30:  6500  lb.  Sugar 

June  18.     Receive  of  J.  W.  Roth,  cash  on  account,  $75. 

June   18.     Sell  J.  C.  Somers,  City,  on  the  terms,  2/10,  n/30: 
1000  lb.  Sugar  at  5j£ 

June  19.     Sell    James    Orton,    City,    the    following     goods.      Terms: 

Cash  $150;  note  at  30  days  with  interest  at  6%  for  $100; 

balance  oh  account: 

40  doz.  Canned  Corn 

30  doz.  Canned  Peaches 

50  bx.  Soap 

25  cases  K.  Cleanser 

20  cases  Oat  Flakes 
Make  three  entries  for  this  transaction.  Debit  James  Orton  in  the 
sales  book  for  the  entire  invoice.  Enter  the  cash  received  in  the  cash  book 
to  his  credit.  Credit  him  in  the  journal  for  the  note  received.  The  difference 
between  the  debit  and  the  sum  of  the  two  credits  is  the  amount  on  account. 
No  entry  is  necessary  for  this  as  the  ledger  will  show  this  difference. 


WHOLESALE  GROCERY  107 

June  19.  Give  B.  J.  Johnson  &  Co.  a  check  for  their  invoice  of 
the  9th,  less  2%  discount. 

How  much  do  you  owe  B.  J.  Johnson  &  Co.?  For  how  much  must  you 
debit  B.  J.  Johnson  &  Co.,  to  balance  their  account?  In  theory,  how  much 
do  B.  J.  Johnson  &  Co.  return  to  you  because  you  have  paid  within  10 
days?  Is  the  discount  a  profit  or  a  loss  to  you?  For  how  much  should  the 
check  be  written? 

Make  two  entries  in  the  cash  book.  Do  the  entries  prove  with  the 
amount  of  the  check? 

June  20.     Sell  C.  I.  Johns,  Greenville,  Mich.,  on  account: 
1400  lb.  Sugar 

12  cases  Baking  Powder 
10  cases  Raisins 
June  20.     Deposit  $200. 
June  22.     Buy  of  J.  B.  Kern  &  Co.,  City,  on  account,  30  days: 

150  bbl.  Flour 
June  23.     Give  the  Fischer  Furniture   Co.   a  check   for    $43.25,    in 
payment  of  the  following: 
1  Roll-top  Desk,  $27.50 
1  Office  Chair,  $6.25 
1  Table,  $9.50 
These  are  not  items  of  expense.     They  will  be  used  for  carrying  on 
the  business,  but  are  assets  of  the  business.     As  they  are  used  they  will 
become  of  less  value  because  of  depreciation.     This  depreciation  is  a  loss. 
Debit  Furniture  and  Fixtures  account  for  the  amount  of  the  check. 
June  24.     Sell  J.  E.  Fritz,  City,  on  account: 
25  cases  Macaroni 
25  bbl.  Flour 
13  cases  Starch 
June  25.     Give  the  Gross  Coal  Co.  a  check  for  $15.45,  for  3  tons  coal 

at  $5.15. 
Is  this  merchandise?    Why? 
June  26.     Receive  of  J.  E.  Fritz,  cash  for  his  note  of  the   16th   and 

interest. 
Make  two  entries. 

What  account  was  debited  when  you  received  this  note? 
Credit  the  same  account  for  the  face  value  of  the  note. 
June  27.     Receive  of  J.  C.  Somers  cash  for  his  purchase  of  the  18th, 

less  2%  discount. 
How  much  does  Mr.  Somers  owe?    How  much  cash  is  received? 
Does  he  owe  anything  after  he  has  paid  the  cash? 
For  how  much  must  his  account  be  credited?     In  theory,  how  much 
do  you  pay  him  back?    What  account  should  be  debited  for  the  discount? 
Is  it  a  profit  or  a  loss  to  you? 

June  29.     Give  E.  B.  Webster  &  Co.  a  check  for  $350,  on  account. 


108  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

June  29.     C.   I.   Johns,    Greenville,    Mich.,   sends  a    check    for    $100 
on  account,  and  orders  the  following: 
Terms:  on  account: 
25  cases  Macaroni 
30  bx.  Soap 
June  30.     Student  and  Robert  Parker  each  withdraw   $50   from  the 

business  by  check,  for  personal  use. 
June  30.     Give  Central  Cartage  Co.  a  check  for  $62.25,   for  freight 
and  dray  age  for  the  month;  $36.10  of  this  is  for  freight 
and  drayage  on  goods  bought,  and  $26.15  is  for  making 
deliveries  of  goods  sold. 
Charge  the  $36.10  to  Merchandise  as  it  adds  to  the  cost  of  the  goods. 
Charge  the  $26.15  to  Expense  as  it  is  an  expense  of  carrying  on  the  business. 
June  30.     Deposit  all  the  cash  on  hand  in  your  Cash  Drawer. 
Second  Report.     Prove  your  cash  and  make  a  report.     Your  report 
should  show  the  items  and  total  of  each  of  the  following: 

1.  Cash  proof 

2.  Paid  invoices 

3.  Unpaid  invoices 

4.  Checks 

5.  Our  notes 

6.  Receipts 

Hand  in  your  report,  your  Outgoing  Papers  envelope,  and  the  Bank 
envelope. 

Present  your  books  of  entry  and  your  check  book  to  your  teacher 
for  approval. 

CLOSING    WORK 

Study  the  closing  of  the  books  of  entry  on  pages  80  and  81. 

1.  Balance  the  cash  book  and  bring  the  balance  down  in  the  last 
column. 

2.  Close  the  sales  book. 

3.  Close  the  purchase  book. 

4.  Open  ledger  accounts,  three  on  a  page,  in  the  following  order: 

Student 

Robert  Parker 

Furniture  and  Fixtures 

Delivery  Equipment  (July) 

Merchandise 

Notes  Receivable 

Accounts  with  customers  (Leave  one-third  of  a  page  for  a  new 

account  for  July). 
Cash 
Notes  Payable 


WHOLESALE  GROCERY  109 

Accounts  with  creditors  (Leave  one-third  of  a  page  for  a  new 

account  for  July) 
Expense 
Interest 

Merchandise  Discount 
Profit  and  Loss 

5.  Post  the  sales  book,  purchase  book,  cash  book  and  journal.  Do 
not  forget  to  show  the  book  and  page  from  which  each  entry  is  posted. 

6.  Take  a  triai  balance  of  differences. 

7.  Inventories,  June  30,  19 — : 
Merchandise: 

13  cases  Baking  Powder 
60  cases  Canned  Corn 
36  cases  Canned  Peaches 
720  lb.  Coffee 
125  bbl.  Flour 
50  cases  K.  Cleanser 
43  cases  Oat  Flakes 
70  bx.  Soap 
20  cases  Starch 
4100  lb.  Sugar 
600  lb.  Tea 
Expense: 

Coal  on  hand,  $14 
Furniture  and  Fixtures: 

Per  schedule  on  file,  $43.25 
Copy  the  inventories  below  the  last  journal  entry. 

8.  Make  a  Statement  of  Profit  and  Loss. 

What  effect  does  the  inventory  of  coal  on  hand  have  on  this  statement? 

The  Furniture  and  Fixtures  have  not  depreciated  to  any  extent  as  yet. 
They  are  considered  worth  their  cost  for  this  month.  In  completing  the 
Statement  of  Profit  and  Loss  your  first  result  is  the  Firm's  Net  Profit. 
Below  that  show  the  share  each  partner  should  receive,  and  what  each 
partner's  net  worth  is.     (See  illustration  on  page  110) 

9.  Make  a  Statement  of  Assets  and  Liabilities. 

Do  not  forget  that  all  inventories  are  assets.  The  result  of  this  state- 
ment is  the  firm's  net  worth. 

The  firm's  net  worth  should  agree  with  the  firm's  net  worth  as 
shown  on  the  Statement  of  Profit  and  Loss. 

10.  Close  the  following  accounts: 

a)  Merchandise 

b)  Expense 

c)  Interest 

d)  Merchandise  Discount 

e)  Profit  and  Loss 


110  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Statement  op  Profit  and  Loss 


2^J~0  0 
/  0  0 


2J~0  0 


7^ 


2-^Z^- 


/  / 


7 


X3 


2^i/ 


Z3 


Z3£f/f 


Z^T/y  X« 


Zj-t/Z  Z3 


J~o3~< 


■f«7 


The  Profit  and  Loss  account  must  be  closed  to  show  the  amount  that 
each  partner  should  receive.  The  account  here  closed  does  not  show  all  of 
the  accounts  on  the  same  side  that  the  Profit  and  Loss  account  for  June  will 
show. 


rf. 


'/fay3 '/   0^t^£^yz^L^ 
3/ 


3/ 
3/ 


£i*6cs. 


/ 

/ 


/f. 


/j/z-yS 


7 

/3  4 

/3¥ 


'£//<?  tZs 


7r 


3/  D^^uy. 


3/ 


^^Z^L^d^- 


f 


4/  6  2o 

3  Z3~ 


t//f 


JU 


WHOLESALE  GROCERY  HI 

f)  Close  each  partner's  account.  Each  partner's  share  of  the 
profits  must  be  transferred  to  his  account.  Each  account  is  then  closed  in 
the  same  way  that  an  individual  proprietor's  account  is  closed. 

g)  Close  the  Cash  Account. 

h)   Rule  a  single  line  on  each  side  of  each  account  that  balances. 
Do  not  close  any  other  accounts. 

11.  Take  a  proof  trial  balance. 

12.  Write  up  your  pass  book.  Take  the  checks  from  your  Bank 
envelope,  count  them,  and  find  the  total.  Enter  this  total  on  the  right  side 
of  the  pass  book  as  follows: 


May 


31 


11  checks  ret'd 


1271 


25 


Your  amount  will  not  be  the  same  as  this. 

Subtract  the  sum  of  the  checks  from  the  sum  of  the  deposits.  Enter 
the  balance  in  red  ink  on  the  right  side,  rule  straight  across,  and  carry 
the  balance  to  the  top  of  the  next  page.  The  balance  should  agree  with  the 
amount  in  the  bank  as  shown  by  the  check  book. 

SET  V  (Continued) 

The  work  of  this  month  is  a  continuation  of  the  work  of  June. 

Use  a  new  page  for  the  journal.  Begin  the  entries  in  the  other  books 
of  entry  on  the  next  line  below  the  entries  for  June.  Read  the  special  in- 
structions for  June  again  before  beginning  this  month's  work. 

TRANSACTIONS    FOR   JULY 

July  1.  Pay  the  rent  for  July.  Examine  the  memorandum  in  the 
journal  for  June  1  before  writing  the  check.  Continue  numbering  the 
checks  in  the  same  way  that  you  have  begun. 

July       1.     Hire  John  Madden  as  clerk  at  $35  per  month. 
Make  a  memorandum  in  the  journal. 

July       2.     Buy  of  J.  Kirk  &  Co.,  Chicago,  on  our  note  at  30  days, 
without  interest: 
30  cases  Matches 
25  cases  W.  Biscuit 
15  cases  Macaroni- 
Give  the  note  in  payment. 

July       3.     Sell  J.  C.  Somers,  City,  on  the  terms,  2/10,  n/30: 
10  cases  Matches  at  $5.40 
20  cases  Oat  Flakes  at  $2.30 
July       3.     Receive  of  J.  E.  Fritz,  on  account,  $200. 
July       3.     Pay  C.  N.  Ray  &  Co.,  the  balance  of  their  account  for 
June. 


112  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Examine  their  ledger  account.      How   much   have  you   bought  from 
them?     How  much  have  you  paid  them? 

July       6.     Sell  L.  N.  Noyes,  City,  on  account: 
24  doz.  Canned  Corn 
16  bx.  Soap 
5  cases  K.  Cleanser 
July       7.     Sell  J.  E.  Fritz,  City,  on  the  terms,  3/5,  2/10,  n/30: 
40  bbl.  Flour  at  $4.50 
2400  lb.  Sugar  at  5j£ 
July       7.     Receive  of  Chas.  Orth,  his  note  at  30  days,  with  interest 

at  6%,  for  $234,  for  invoice  of  June  15. 
July       8.     Buy  of  the  Hart  Canning  Co.,  Hart,  Mich.,  on  the  terms, 
2/10,  n/30: 
120  doz.  Canned  Corn 
200  doz.  Canned  Peaches 
July       9.     Receive  of  C.  I.  Johns,  on  account,  $150. 
July       9.     Sell  C.  I.  Johns,   Greenville,   Mich.,  the  following  goods: 
Terms:  note   for  15    days    with   interest    at  6%,  for  $60; 
balance  in  30  days: 
8  cases  W.  Biscuit 

24  doz.  Canned  Peaches 
5  cases  Baking  Powder 

12  cases  K.  Cleanser 
Debit  C.  I.  Johns  in  the  sales  book  for  the  whole  amount  of  the  invoice 
and  credit  him  in  the  journal  for  the  amount  of  the  note.     The  ledger 
account  will  show  the  balance  after  these  two  entries  have  been  posted. 
July     10.     Pay  J.  B.  Kern  &  Co.,  on  account,  $400. 
July     11.     Receive  of  J.    E.    Fritz,    cash    for    invoice   of  the  7th,  less 

discount. 
In  making  the  entries  for  this  transaction  be  sure  that  the  credit  to 
J.  E.  Fritz's  account  for  this  invoice  is  the  same  as  the  debit  when  the  goods 
were  sold. 

July     13.     Sell  B.  C.  Donovan,  City,  for  cash: 

30  bbl.  Flour  at  $4.50 
Mr.   Donovan  is  not  a  regular  customer.     Do  not  open  an  account 
with  him.     Enter  in  the  sales  book  and  cash  book  and  check  in  both  places. 
July     13.     Receive  of   J.    C.   Somers  cash    for   invoice  of  the  3d,  less 

discount. 
Do  not  forget  that  your  entry  must  show  that  Mr.  Somers  has  paid 
invoice  of  the  3d  in  full  and  that  you  have  allowed  him  discount. 
July     14.     Buy  of  E.  B.  Webster  &  Co.,  City,  on  account: 

25  cases  Raisins 

12  cases  Baking  Powder 
10  cases  Oat  Flakes 
July     14.     Deposit  all  cash  on  hand. 


WHOLESALE  GROCERY  113 

July     15.     Receive  of  L.  N.  Noyes,  on  account,  $75. 
July     15.     Sell  Chas.  Orth,  City,  on  account: 
25  bx.  Soap 
5  cases  Macaroni 
8  cases  Starch 
12  cases  W.  Biscuit 
Third  Report.     Prove  cash.     Do  not  forget  to  count  the  cash  in  your 
Cash  Drawer. 

Fill  out  a  report  blank  showing  the  cash  proof,   the  papers  in  your 
Outgoing  Papers  envelope,  and  the  checks  in  the  Bank  envelope. 

Hand  in  your  report,  your  Outgoing  Papers  envelope,  and  your  Bank 
envelope. 

July     16.     Sell  James  Orton,  City,  on  account: 
48  cases  Canned  Peaches 
10  cases  Baking  Powder 
8  cases  Raisins 
5  cases  W.  Biscuit 
July     17.     Give  E.  B.  Webster  &  Co.,  your  note  at  30  days,  for  $150, 

on  account. 
July     18.     Pay  the  Hart  Canning  Co.,  for  their  invoice  of  the  8th, 

less  discount. 
July     18.     Receive  of  James  Orton  cash  for  his  note  of  June  19,  and 

interest. 
How  many  entries  must  be  made  for  this  transaction?     Why? 

July     20.     Sell  J.  E.  Fritz,  City,  on  account: 
72  cases  Canned  Corn 
120  lb.  Coffee 
144  lb.  Tea 
July     21.     Pay  J.   B.   Kern   &   Co.,   the  balance   of  their  invoice  of 

June  22. 
July     21.     Receive  of  James  Orton,  on  account,  $80. 
July     22.     Sell  C.  I.  Johns,  Greenville,  Mich.,  on  account,  10  days: 
15  bx.  Soap 

8  cases  Macaroni 
15  bbl.  Flour 
July     23.     Buy  of  J.  B.  Kern  &  Co.,  City,  on  account: 

50  bbl.  Flour 
July     23.     By  agreement  with   E.   B.   Webster   &   Co.,   prepay  your 
note   of   the    17th.      They   allow   you   discount   for   the 
unexpired  time  at  6%. 
How  long  a  time  has  the  note  to  run?    Should  the  check  be  written  for 
more  or  less  than  the  face  value  of  the  note?    What  account  must  be  debited 
for  the  face  value?       What  account   must    be  credited  for  the  discount? 
Do  you  make  or  lose  by  this  transaction? 


114  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

July     24.     Receive  of  C.  I.  Johns  cash  for  his  note  of  the  9th,  and 

interest. 
July     24.     Deposit  $250. 

July     25.     Sell  J.  W.  Roth,  Tiffin,  Ohio,  on  account,  30  days: 
15  cases  K.  Cleanser 
12  cases  Starch 
15  cases  Matches 
,     10  cases  Raisins 
July     27.     Buy  of  C.  N.  Ray  &  Co.,  New  York,  on  the  terms,  2/10, 
n/30: 
480  lb.  Coffee 
July     28.     Sell  M.  Tinsman,  Des  Moines,  Iowa,  on  account: 
5  cases  Matches 
7  cases  Raisins 
1200  lb.  Sugar 
July     28.     Buy  a  delivery  truck  of  the  Cole  Motor  Co.,  for  $1275. 

Terms:  cash,  $500;  balance  in  60  days. 
A  special  account  called  Delivery  Equipment  must  be  kept  to  show 
the  cost  of  the  delivery  truck.     This  is  a  property  account  like  Furniture 
and  Fixtures.     Nothing  but  real  values  that  add  to  the  value  of  the  equip- 
ment should  be  charged  to  this  account.     This  cannot  be  entered  in  the 
purchase  book  as  it  is  not  a  purchase  of  merchandise.     Make  an  entry 
in  the  journal  debiting  Delivery  Equipment  and  crediting  Cole  Motor  Co. 
for  $1275.    Write  a  check  for  $500.    Then  make  an  entry  in  the  cash  book 
debiting  Cole  Motor  Co.  for  the  amount  of  the  check. 
July     29.     Receive  of  J.  E.  Fritz,  on  account,  $175. 
July     29.     Pay  J.  B.  Kern  &  Co.,  on  account,  $150. 
July     30.     Student  and  Robert  Parker  each  withdraw  $75  for  personal 

use.     Give  each  partner  a  check  for  that  amount. 
July     31.     Pay  clerk's  salary,  $35. 

July     31.     Give   the   Central   Transfer    Co.    a   check   for   $71.25   for 
freight  and   drayage  for   the   month,   $40.75   being  for 
freight  and  drayage  on  merchandise  bought  and  $30.50 
drayage  on  goods  sold. 
The  first  is  a  charge  added  to  the  cost  of  the  goods;  the  second  is  an 
expense  of  carrying  on  the  business. 
Deposit  all  the  cash  on  hand. 
Fourth  Report.     Prove  cash  and  make  a  report. 
Hand  in  the  report  and  the  Outgoing  Papers  and  Bank  envelopes. 

CLOSING  WORK 

1.  Close  the  cash  book,  sales  book,  and  purchase  book. 

2.  Post  the  books  of  entry. 

3.  Take  a  trial  balance  of  differences. 

4.  Inventories,  July  31,  19 — ; 


WHOLESALE  GROCERY  115 

Merchandise: 

10  cases  Baking  Powder 
84  doz.  Canned  Corn 
164  doz.  Canned  Peaches 
1080  lb.  Coffee 
90  bbl.  Flour 
18  cases  K.  Cleanser 

2  cases  Macaroni 
33  cases  Oat  Flakes 
14  bx.  Soap 
500  lb.  Sugar 
456  lb.  Tea 
Expense: 

Coal  on  hand,  $11.75. 
Furniture  and  Fixtures,  Cost      $43.25 
Less  1%  depreciation  _-43 

Present  value  $42.82 

5.  Make  a  Statement  of  Profit  and  Loss. 

The  Furniture  and  Fixtures  are  worth  43j£  less  than  cost  on  account 
of  use.     The  43j£  depreciation  is  a  loss. 

The  Delivery  Equipment  has  just  been  purchased.  It  is  worth  its 
cost  price. 

6.  Make  a  Statement  of  Assets  and  Liabilities. 

How  much  is  the  asset  of  Furniture  and  Fixtures  worth  to  the  business? 
How  much  is  the  Delivery  Equipment  worth  to  the  business? 

7.  Close  the  following  accounts: 

a)  Furniture  and  Fixtures 

To  close  Furniture  and  Fixtures,  enter  the  inventory  value  in  red  ink 
on  the  credit  side  and  subtract  it  from  the  debit  side.  Enter  the  differ- 
ence, the  depreciation,  as  Profit  and  Loss  on  the  credit  side.  Rule  and 
transfer  in  the  same  way  as  in  Expense. 

b)  Merchandise 

c)  Expense 

d)  Interest 

e)  Merchandise  Discount 

f)  Profit  and  Loss 

10.  Close  all  the  other  ledger  accounts  that  do  not  balance  by  Bal- 
ance.    Rule  those  that  balance. 

11.  Take  a  proof  trial  balance. 

12.  Write  up  your  pass  book. 

Exercise  29.  From  the  following  trial  balance  and  inventories  make 
statements  of  Profit  and  Loss  and  of  Assets  and  Liabilities. 


116 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


TRIAL  BALANCE,  JUNE  30,   19 

C.  D.  Seigel,  Proprietor $3175 .  50 

D.  E.  Ryan,  Proprietor 3175 .  50 

Furniture  and  Fixtures $     57 .  80 

Merchandise 3468 .  55       2132 .  40 

Notes  Receivable. 576.45 

D.  J.  Long 1312 .  50 

C.  E.  Severns 932 .  35 

B.  J.  Dietsch 1643 .  25 

Cash 2310,60 

Notes  Payable 1017 .  25 

F.  A.  Cannon 647 .  05 

H.  E.  Emery 379 .  70 

Expense 236 .  40 

Interest 5 .  25 

Merchandise  Discount 15 .  75 

$10543.15  $10543.15 
Inventories: 

Merchandise $1671 .  15 

Expense 15 .  00 

Furniture  and  Fixtures 54.50 

The  partners  share  profits  and  losses  equally. 

Exercise  30.     From  the  following  trial  balance  and  inventories  make 
statements  of  Profit  and  Loss  and  of  Assets  and  Liabilities. 


TRIAL   BALANCE,  JULY    31,    19 — 

D.  E.  Ferry,  Proprietor 

C.  A.  Lange,  Proprietor 

Furniture  and  Fixtures $     42 

Delivery  Equipment 516 

Merchandise 2978 

Notes  Receivable 742 

L.  E.  Cary 126 

B.  J.  Eaton 913 

C.  I.  Gross ! 98 

Cash 2017 

Notes  Payable •> 

G.  I.  Winton 

M.  A.  Mixer 

Expense 197 

Interest 8 

Merchandise  Discount 6^ 

$7646 


.80 
.25 
.15 
.45 
.30 
.10 
.25 
.85 


15 
05 
55 
90 


$2071.30 
1116.15 


2063.20 


1436.65 
712.35 
247.25 


$7646.90 


WHOLESALE  GROCERY  117 

Inventories: 

Merchandise $1031 .  65 

Expense : 12 .  50 

Furniture  and  Fixtures 40 .  65 

Delivery  Equipment 511.10 

REVIEW  QUESTIONS 

1.  Analyze  each  of  the  following  accounts  by  telling  for  what  each  is  debited, 
for  what  credited,  what  the  difference  shows,  and  why:  (a)  Notes  Receivable;  (b)  Notes 
Payable;  (c)  Interest;  (d)  Merchandise  Discount;  (e)  a  partner's  account. » 

2.  Why  should  all  sales  be  entered  in  the  sales  book? 

3.  How  should  cash  sales  in  a  retail  business  be  entered? 

4.  How  should  cash  sales  to  regular  customers  be  entered? 

5.  How  should  cash  sales  to  those  that  are  not  regular  customers  be  entered? 

6.  What  entries  should  be  made  when  merchandise  is  bought  and  a  note 
given? 

7.  What  entries  should  be  made  when  merchandise  is  sold  and  a  note  received 
in  payment? 

8.  Explain  the  meaning  of  3/5,  2/10,  n/30. 

9.  Give  the  rule  for  debiting  and  crediting  Merchandise  Discount. 

10.  What  may  the  Merchandise  Discount  account  show  when  closing  the  ledger? 

11.  What  entry  should  be  made  when  the  business  pays  an  invoice,  less  discount? 

12.  What  entry  should  be  made  when  a  customer  pays  an  invoice  less  discount? 

13.  What  are  the  advantages  of  a  commercial  account  at  the  bank? 

14.  Of  what  advantage  are  payments  by  check? 

15.  Explain  the  necessary  steps  in  opening  a  bank  account. 

16.  What  is  the  pass  book?    Who  makes  the  entries  in  it? 

17.  What  important  things  should  be  observed  in  writing  checks? 

18.  How  should  checks  be  indorsed  if  they  are  to  be  sent  through  the  mail?     How 
may  they  be  indorsed  for  deposit? 

19.  What  is  the  bank's  statement  of  account? 

20.  What  is  meant  by  reconciling  a  bank's  statement?     How  is  it  done. 

21.  What  kind  of  an  account  is  Furniture  and  Fixtures?    How  should  it  be  closed 
if  there  is  a  depreciation? 

22.  To  what  account  would  you  charge  repairs  made  to  fixtures?    Why? 

23.  To  what  account  would  you  charge  gasoline  for  the  motor  truck?    A  new  tire? 
Give  reasons. 

24.  To  what  account  would  you  charge  freight  or  drayage  on  goods  bought? 

25.  To  what  account  would  you  charge  drayage  for  delivering  goods  to  customers? 

26.  How  do  you  prove  cash? 


118  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Model  Letter  Ordering  Goods 


J~yZ 


WHOLESALE  GROCERY  119 

MODEL    LETTER    OF    REMITTANCE 

572  Twelfth  St., 

Madison,  Wis.,  May  11,  19 — . 
John  Hoffman  &  Sons  Co., 

East  Water  and  Buffalo  Sts., 
Milwaukee,  Wis. 

Gentlemen: 

Inclosed  you   will  find    my  check  for  $350.84,  in  full  for  in- 
voice of  May  3,  less  2%. 

Your  prompt  shipment  of  the  goods  is  greatly  appreciated.    The  goods 
arrived  in  good  condition  and  are  proving  satisfactory. 

Yours  very  truly, 

Inclosure.  James  M.  Bradley. 


LETTER    ACKNOWLEDGING    REMITTANCE 

East  Water  and  Buffalo  Sts., 

Milwaukee,  Wis.,  May  13,  19—. 
Mr.  James  M.  Bradley, 
572  Twelfth  St., 
Madison,  Wis. 

Dear  Sir: 

We  are  in  receipt  of  your   check   for    $350.84,  in  full  payment  of 
invoice  of  May  3,  less  2%,  and  have  placed  the  remittance  to  your  credit. 
We  are  pleased  that  the  goods  are  giving  satisfaction,  and  hope  for 
further  orders  from  you. 

Yours  very  truly, 

John  Hoffman  &  Sons  Co. 

by  C.  E.  H. 


PART  II 


CHAPTER  XVI 
TRADING  ACCOUNTS 


The  Merchandise  account,  as  we  have  learned,  is  a  mixed  account. 
To  this  account  have  been  posted  the  purchases  and  sales.  At  the  end 
of  the  business  period  the  inventory  has  been  entered  in  the  Merchandise 
account  and  the  profit  or  loss  found. 

The  Merchandise  account,  as  a  mixed  account,  may  be  used  in  a  small 
business  but  is  not  adapted  to  a  large  business.  There  are  other  elements 
that  must  be  considered  in  a  larger  business.  Returns  and  allowances  are 
made  on  both  purchases  and  sales.  Freight  must  be  paid  on  goods  bought 
by  the  business.     Materials  and  supplies  for  packing  must  be  purchased. 

One  mixed  Merchandise  account  containing  all  of  these  different  items 
would  not  give  much  definite  information  to  the  business  man.  In  its  place 
several  accounts  will  be  kept.  The  size  of  the  business  and  the  necessity 
of  providing  detailed  information  will,  to  a  large  extent,  determine  how 
many  accounts  will  be  kept.  For  the  present,  accounts  will  be  kept  with 
Purchases,  Sales,  Merchandise  Trading,  and  Freight  In. 

Purchases  Account.  An  account  is  kept  with  Purchases  to  show  the 
amount  of  all  merchandise  bought  by  the  business,  for  all  added  costs, 
and  for  all  returns  and  allowances  on  purchases. 

The  cost  of  merchandise  is  more  than  simply  the  cost  of  the  goods 
bought.  To  that  must  be  added  the  cost  of  freight  and  drayage  on  goods 
bought.  The  cost  of  boxes,  barrels,  packing  materials,  and  any  charges 
for  buying,  such  as  agent's  commission,  add  to  the  cost  of  the  goods,  as  well 
as  the  wages  paid  the  shipping  clerk  and  his  helpers. 

A  separate  account  may  be  kept  with  each  kind  of  added  cost  if  the 
details  are  great  in  number.  For  the  present,  an  account  will  be  kept 
with  Freight  In  for  the  cost  of  freight  and  drayage  on  goods  bought.  All 
other  charges  will  be  debited  direct  to  Purchases.  All  charges  to  Purchases 
should  be  explained  in  the  ledger  by  writing  the  charge  in  the  explanatory 
column,  as  Cooperage,  Packing  boxes,  Agent's  commission. 

Monthly  the  total  of  the  purchase  book  should  be  posted  to  the  debit 
of  the  Purchases  account. 

When  a  Freight  In  account  is  kept,  the  total  of  that  account  should  be 
closed  into  Purchases  before  Purchases  is  closed. 

120 


TRADING  ACCOUNTS 


121 


Returned  Goods,  Rebates,  and  Allowances.  When  the  business 
returns  goods  that  have  been  charged  to  Purchases  or  is  given  a  rebate  or 
allowance  for  a  shortage,  overcharge,  or  for  damaged  goods,  Purchases  must 
be  credited.  These  items  are  not  usually  very  numerous,  so  they  may  be 
entered  in  the  journal.  A  separate  book  may  be  used  for  them  in  a  larger 
business. 

The  Journal  entry  would  be  as  follows: 


f 


3  2-S 


^c&i^^~-*£^fL 


3 


X<J- 


^ts^isv: 


In  posting  this  to  the  ledger  in  the  explanatory  column  of  both  C.  N. 
Cady's  account  and  of  Purchases,  " Damaged  goods"  should  be  written. 

When  an  allowance  is  made,  the  seller  usually  sends  the  buyer  a  credit 
memorandum.  This  is  often  printed  and  written  in  red  ink.  It  shows 
the  buyer  that  he  has  been  given  credit  for  the  allowance  on  the  seller's  books. 

Rule.  Debit  Purchases  for  all  merchandise  bought,  for  the  cost  of 
packing  and  shipping  materials,  and  for  the  wages  of  the  shipping  clerk 
and  helpers. 

Credit  Purchases  for  all  goods  returned  by  us  and  for  all  allowances 
and  rebates  allowed  to  us  on  merchandise. 

To  Close  Purchases  Account.  The  object  of  the  closing  of  the  Pur- 
chases account  is  to  find  the  cost  of  the  goods  sold.  To  do  this,  the  inventory 
of  merchandise  on  hand  at  closing  must  be  entered  on  the  credit  side  in  red 
ink.  The  difference,  a  debit  balance,  is  entered  in  red  ink  on  the  credit 
side  with  the  words  Merchandise  Trading  and  the  page  of  that  account. 
This  difference  is  transferred  to  the  debit  side  of  Merchandise  Trading  in 
black  ink.     (See  illustration  on  page  122) 

Freight  In.  This  account  is  kept  to  show  the  cost  of  all  freight  and 
drayage  on  goods  coming  into  the  business.  It  is  debited  for  these  costs. 
It  rarely  has  any  credit  items.  It  may  be  credited  when  a  freight  or  drayage 
bill  has  been  paid  and  afterward  an  allowance  is  made  by  the  transportation 
company  because  of  a  mistake  or  an  overcharge. 

To  Close  Freight  In.  Freight  In  should  be  closed  into  Purchases 
account  as  it  is  an  added  cost  of  merchandise  bought.  Find  the  sum  of  the 
debit  side.  From  this  sum,  subtract  the  sum  of  the  credit  side,  if  any. 
The  difference  is  the  amount  to  be  transferred  to  Purchases.  Enter  this 
difference  on  the  credit  side  with  the    date,    Purchases,   and   the    page    of 


122 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


r 

Jo 
Jo 


du 


P 


Z^/Ab/C' 


*z^nsi*-e^??^c4rtsy 


7 
// 

/A2- 


3  J  Qt/yo 


tzCs 


j~o. 

7* 

fo 


for 


f 
1/ 

Jo 
Jo 


C 
6 

7 

/2- 


ZS  7- 


'7 

JO 

/o 

/2-Cj 

/f,7,7l 


o 
AT 


33ot/'7o 


the  Purchases  account.  Transfer  this  difference  to  the  debit  side  of  the 
Purchases  account  in  black  ink,  writing  Freight  In,  in  the  explanatory 
column. 

Sales  Account.  This  account  is  kept  to  show  the  gross  sales,  the  goods 
returned,  and  allowances,  rebates  and  overcharges  on  goods  sold. 

Rule.  Debit  Sales  for  goods  returned  to  us  and  for  allowances  for 
shortage,  damaged  goods  or  overcharges  on  goods  sold. 

Credit  Sales  for  all  goods  sold.    The  difference  is  the  net  sales. 

Entries  for  returned  goods  and  for  allowances  are  made  in  the  journal 
unless  a  separate  book  is  kept  for  that  purpose.  The  entry  for  an  allowance 
to  a  customer  for  damaged  goods  would  be  made  as  follows: 


s^iU^d^ 


{yC^c^yt^^^yi^c^ 


c&4^. 


/r 


/t 


To  Close  Sales  Account.  Find  the  difference  between  the  credit  and 
debit  sides.  Enter  in  red  ink  on  the  debit  side  the  date,  Merchandise 
Trading,  the  page  of  that  account,  and  the  amount.  Transfer  this  amount 
to  the  credit  side  of  Merchandise  Trading  in  black  ink. 


TRADING  ACCOUNTS 


123 


-J3uz^^dy 


<r- 


/s 

3o 


to 

/z. 


'9 

7 

/z 

X3^y 


X3  f&  3S 


ZS 

Cs 
/J 


<fyj-3 


'9- 


*f 


/<r 


2.3 rC 


23f£.t;r 


•jTcT 


Merchandise  Trading  Account.  This  account  is  kept  to  show  the  gross 
trading  profit  or  loss.  It  shows  the  profit  or  loss  in  buying  and  selling 
before  any  expenses  have  been  deducted.  The  account  is  made  up  of 
transfers  from  the  Purchases  and  the  Sales  accounts.  On  the  debit  side 
is  the  balance  of  the  Purchases  account.  This  represents  the  entire  cost  of 
the  goods  sold.  On  the  credit  side  is  the  balance  of  the  Sales  account. 
This  represents  the  net  returns  from  sales.  The  account  then  shows  a 
profit  if  the  credit  side  is  the  larger  and  a  loss  if  the  debit  side  is  the  larger. 


PAGE  12 


3o 


/o 

/4 


/(777 
3  &# 


C^^f^43(? 


rs 


13^7  J^L 


'f- 


-^£tz^C^<£^ 


// 


23  V- 


7 


J^z 


3To 


Ja. 


All  of  these  trading  accounts  are  nominal  accounts  except  Purchases. 
The  Purchases  account  is  a  mixed  account  in  that  it  contains  a  real  element, 
the  inventory  of  goods  on  hand.  The  balance  of  Purchases  transferred  to 
Merchandise  Trading  is  the  nominal  element. 

OPENING  DOUBLE  ENTRY  BOOKS 

The  investments  so  far  used  have  been  cash  investments.  An  individual 
proprietor  may  begin  a  business  by  investing  other  assets  besides  cash. 
Two  persons  may  form  a  copartnership  and  each  invest  cash  and  other 
assets;  they  may  each  owe  liabilities  which  the  new  business  will  assume. 


124 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


In  making  the  entries  for  cash  and  other  assets  invested,  it  is  best 
to  enter  all  the  assets  including  cash  in  the  journal  so  as  to  show  the  whole 
investment  in  one  place.  The  cash  is  then  entered  in  the  cash  book  and 
checked. 

Everything  must  be  entered  so  as  to  show  the  present  value  to  the 
business  of  all  assets.  If  an  interest-bearing  note  is  invested,  the  face  value 
of  the  note  must  be  entered  to  Notes  Receivable  and  the  accrued  interest 
under  Interest.  If  a  non-interest-bearing  note  is  invested,  discount  must 
be  computed  on  it  for  the  unexpired  time  of  the  note.  The  face  value  of 
the  note  must  be  entered  on  one  side  and  the  discount  under  Interest  on  the 
other  side. 

If,  on  May  1,  C.  L.  Light  invests  cash  $3000;  a  stock  of  goods,  $4175; 
L.  E.  Emery's  note  for  $350,  dated  April  10,  payable  60  days  after  date, 
with  interest  at  6%;  and  office  furniture  valued  at  $45,  the  entry  would  be 
made  as  follows: 


Milwaukee,  Wis.,  May  1,  19— 


V 


Cash 

Purchases 
Notes  Receivable 


C.  L.  Light  has  this  day  begun  the 
Jobbing  Furniture  business,  investing  the 
following: 

On  hand 
Per  inventory 
L.  E.  Emery's 
note,  dated  Apr.  10 
Interest  21  da.  on  above 

Furniture  &  Fixtures  Per  schedule 
To  C.  L.  Light       Total  assets 


Cash  Receipts 


3000 

4175 

- 

350 

- 

123 

45 

7571 

19- 
May    1      V      C.  L.  Light 


Cash  investment 


3000 


When  each  of  two  or  more  partners  make  investments  of  cash  and  other 
assets  and  owe  certain  liabilities,  separate  entries  must  be  made  for  each 
partner. 

Rule.  Debit  each  asset  including  cash  and  each  deduction  from  a 
liability,  under  the  proper  heading. 

Credit  each  liability  and  each  deduction  from  an  asset,  under  the  proper 
heading. 

Credit  the  partner  for  the  net  worth  of  his  investment  as  shown  by 
the  difference  between  the  total  debits  and  total  credits. 


TRADING  ACCOUNTS 


125 


June  1.  D.  G.  Groves  and  J.  A.  Ford  have  formed  a  copartnership 
in  the  Jobbing  Hardware  business  under  the  firm  name  of  Groves  &  Ford. 
They  agree  to  share  gains  and  losses  equally  and  each  agrees  to  devote  his 
entire  time  to  the  business. 

D.  G.  Groves  invests  the  following  assets:  Cash  $2500;  stock  of 
hardware,  $2725;  motor  truck  and  equipment,  $1275;  office  furniture  and 
fixtures,  $145;  C.  L.  Eaton's  note  for  $450,  dated  May  17,  payable  60 
days  after  date,  with  interest  at  6%;  D.  E.  Farwell's  account  for  $325. 

He  owes  H.  I.  Gede,  on  account,  $455,  and  a  note  for  $1500,  in  favor  of 
National  Exchange  Bank,  payable  90  days  after  April  10,  without  interest. 

J.  A.  Ford  invests  the  following  assets:  Cash,  $505.45;  a  store  building 
and  lot  valued  at  $10475;  B.  E.  Allen's  note  for  $575,  dated  May  21,  payable 
30  days  after  date,  without  interest. 

He  owes  the  Gunn  Land  Co.  a  note  for  $6000,  dated  March  15,  payable 
six  months  after  date,  with  interest  at  6%,  as  part  of  the  purchase  price  of 
the  building  and  lot. 

The  memorandum  for  the  formation  of  the  copartnership  and  the 
entries  are  shown  here. 


Milwaukee,  Wis.,  June  1,  19- 


D.  G.  Groves  and  J.  A.  Ford  have  this 
day  formed  a  copartnership  under  the 
firm  name  of  Groves  &  Ford,  to  engage 
in  the  Jobbing  Furniture  business  at 
316  Grand  Ave.  They  agree  to  share 
profits  and  losses  equally  per  articles  of 
copartnership  filed. 

D.  G.    Groves   invests    the  following 
assets  and  liabilities: 
Cash  On  hand 

Purchases  Per  inventory 

Delivery  Equipment  Per  schedule 
Furniture  &  Fixtures      "  " 


Notes  Receivable 

Interest 

D.  E.  Farwell 

Interest 

To  H.  I.  Gede 
Notes  Payable 
D,  G.  Groves 


Per  bill  book 
15  da.  on  above 
Owes  the  business 
38  da.  disc,  on 

notes  payable 
Business  owes  him 
Per  bill  book 
Net  worth 


2500 

2725 

1275 

145 

450 

1 


13 


325- 
9  50 


455 
1500- 
5475  63 


126 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


1. 
J.  A.  Ford  invests 

the  following  as- 

sets  and  liabilities: 

V 

Cash 

Real  Estate 

Notes  Receivable 

On  hand 

Per  inventory 

Per  bill  book 

505  45 
10475- 
575- 

To  Notes  Payable 

a      u        a 

6000 

- 

Interest 

78  da.  on  above 

78- 

Interest 

19  da.  on   notes 

182 

rec. 

J.  A.  Ford 

Net  worth 

5475  63 

The  $9.50,  in  D.  G.  Groves'  entry  for  the  assets,  charged  to  Interest, 
is  the  discount  on  the  note  in  favor  of  National  Exchange  Bank  for  $1500 
for  the  unexpired  time,  38  days,  at  6%.  This  is  a  deduction  from  the 
liabilities. 

The  $1.82,  in  J.  A.  Ford's  entry  for  the  liabilities,  credited  to  Interest, 
is  the  discount  on  B.  E.  Allen's  note  for  $575  for  the  unexpired  time,  19 
days,  at  6  %.  This  is  a  deduction  from  the  assets  as  the  note  is  not  worth 
its  face  value. 

Exercise  31.  Make  the  necessary  entries  for  the  following:  C.  Mc- 
Beath  began  business  June  1,  investing  the  following  assets  and  liabilities: 

2  horses  and  a  wagon  valued  at  $475 

Office  furniture  and  fixtures  valued  at  $48.25 

Stock  of  goods,  per  inventory,  $2198.50 

•5  tons  of  coal  valued  at  $4.75  per  ton 

C.  L.  Frank's  note,  dated  May  18,  payable  30  days  after  date,  with 
interest  at  6  %,  for  $275 

D.  E.  Crane  owed  him  on  account,  $875.35 

F.  A.  Post  owed  him  on  account,  $317.40 
Cash  in  Marine  Bank  $1375.75 

He  owed  a  note  in  favor  of  Delzer  &  Co., dated   Apr.   25,  payable  60  days 

after  date,  with  interest  at  6%,  for  $950. 
He  owed  on  account : 
D.  E.  Camm,  $412.50 
M.  A.  Avery,  $178.25 

Exercise  32.  Make  the  necessary  entries  for  the  following:  G.  A.  Kunz 
and  C.  E.  Jarvis  formed  a  copartnership  on  July  1,  under  the  name  of  G.  A. 
Kunz  &  Co.     They  agree  to  share  profits  and  losses  equally. 

G.  A.  Kunz  invests  the  following  assets  and  liabilities: 
Store  building  and  lot,  $9750 

Delivery  truck,  $1375 
Office  furniture,  $85.25 
Office  supplies,  $15.45 
Stock  of  goods,  $3042.20 


TRADING  ACCOUNTS  127 

D.  L.  Lawton's  note,  dated  June  10,  payable  30  days  after  date,  with- 
out interest,  for  $560  (Compute  discount  on  this  note  at  6%) 

G.  E.  Cooper's  note,  dated  June  3,  payable  30  days  after  date,  with 
interest  at  6%,  for  $625 

S.  N.  Frazer  owes  on  account,  $378.40 

Cash  in  Third  National  Bank,  $1072.25 

He  owes  a  note  in  favor  of  National  Exchange  Bank,  dated  May  1, 
payable  3  months  after  date,  with  interest  at  6%,  for  $1250 

He  owes  on  account: 

Chas.  Fuller,  $412.60 

D.  Williams,  $257.80 

C.  E.  Jarvis  invests  the  following  assets  and  liabilities: 

C.  &  N.  W.  R.  R.  Stock,  $4500 

Stock  of  goods,  $1365.20 

G.  E.  Long's  note,  dated  June  8,  payable  30  days  after  date,  without 

interest,  for  $1172.50     (Compute  discount  at  6%) 
Jarvis'  note,  dated  July  1,  payable  60  days  after  date,  with  interest 

at  6  %,  for  $5000 
Cash,  $4750 
He  owes  a  note  in  favor  of  Banker  &  Co.,  dated  June  12,  payable  60 

days  after  date,  without  interest,  for  $1500     (Compute  discount  at 

6%) 
He  owes  on  account: 
C.  L.  Libbey,  $437.50 
Frank  Pace,  $850.75 


CHAPTER  XVII 
BANK  AND   SIGHT  DRAFTS 


Drafts  are  of  two  kinds,  bank  and  personal. 

Personal  Drafts  are  either  sight  or  time. 

A  Bank  Draft  is  an  order  drawn  by  one  bank  on  a  bank  in  another  city, 
payable  to  the  order  of  a  person. 

Parties.  There  are  three  parties  to  a  bank  draft:  the  drawer,  the 
payee  and  the  drawee. 

The  drawer  is  the  bank  that  draws  the  draft. 

The  payee  is  the  person  in  whose  favor  the  draft  is  drawn. 

The  drawee  is  the  bank  on  which  the  draft  is  drawn. 

A  bank  draft  is  similar  to  a  check.  A  check  is  an  order  on  a  bank 
drawn  by  a  depositor  to  the  order  of  a  person  or  to  cash  or  bearer.  The 
depositor  orders  the  bank  to  pay  a  certain  sum  of  money  out  of  the  funds 
that  he  has  on  deposit  with  the  bank. 

Banks  have  deposits  with  banks  in  the  large  cities,  particularly  with 
banks  in  New  York  City  and  Chicago.  A  bank  draft  is,  then,  simply  an 
order  by  a  bank  on  a  bank  in  which  it  has  a  deposit. 

If  the  draft  is  on  a  New  York  bank,  it  is  frequently  called  New  York 
exchange,  and  if  on  a  Chicago  bank,  Chicago  exchange. 

Uses  of  Bank  Drafts.  Bank  drafts  are  used  in  place  of  checks  to  make 
remittances  to  firms  in  other  cities.  K.  L.  Laabs,  Milwaukee,  orders  an 
invoice  of  goods  of  Arnol(J  &  Co.,  Pittsburg,  Pa.,  amounting  to  $242.75. 
He  has  never  dealt  with  Arnold  &  Co.  before,  and  his  financial  standing  is 
not  known  to  Arnold  &  Co.  If  he  sends  a  check  on  a  Milwaukee  bank  in 
payment,  Arnold  &  Co.  will  not  fill  the  order  until  they  know  that  the 
check  is  good.  That  will  take  several  days.  Arnold  &  Co.  must  deposit 
it  with  their  bank  in  Pittsburg.  The  Pittsburg  bank  must  send  it  to  the 
Milwaukee  bank  either  direct  or  through  a  Chicago  bank,  and  if  the  check 
is  good,  the  credit  must  be  sent  back  to  the  Pittsburg  bank  in  the  same  way. 

If  K.  L.  Laabs  had  sent  a  New  York  draft  in  payment,  it  would  have 
been  accepted  as  cash  and  the  order  shipped  at  once. 

New  York  drafts  are  taken  everywhere  as  cash  for  two  reasons: 

1.  They  are  drawn  by  responsible  financial  institutions  on  large  banks 
of  large  cities. 

128 


BANK  AND  SIGHT  DRAFTS  129 

2.  Before  a  bank  draft  will  be  issued,  the  buyer  must  pay  for  it. 
He  may  pay  money,  give  a  check  on  his  account  at  the  bank,  or  pay  in  any 
other  funds  the  bank  accepts  as  cash. 

If  the  buyer  has  an  account  at  the  bank,  he  draws  a  descriptive  check, 
as  follows: 

"Pay  to  the  order  of  N.  Y.  Draft  $242.75,  Exch.  25^,  $243." 

The  bank  draft  will  then  be  issued  if  the  check  is  good.  The  charge 
of  25^  is  exchange,  which  the  bank  charges  for  its  trouble  and  expense. 
If  the  buyer  of  the  draft  does  not  know  the  amount  of  the  exchange,  or 
prefers  to,  he  may  write  the  check  for  the  amount  of  the  draft  which  he 
wishes  to  buy  and  pay  the  exchange  in  money. 

Bank  drafts  are  usually  made  payable  to  the  buyer  (remitter)  and 
indorsed  by  a  special  indorsement  to  the  person  to  whom  payment  is  to  be 
made.  The  advantage  of  this  is  that  the  draft  then  shows  the  name  of  the 
remitter  on  the  back.  This  is  an  advantage  to  the  person  receiving  as  there 
is  no  danger  of  placing  the  credit  to  the  wrong  account. 

The  bank  draft  which  K.  L.  Laabs  would  send  to  Arnold  &  Co.  is 
as  follows: 


Milwaukee,  Wis.,  \  SsT^h  3 ,  19  —     No.    4^/^~ 

National  Exchange  Bank 

PAY  TO  THE  ORDER  OF  l^_j  -  ^X^     '  <^>C^?^^7^-^^^  '  ' ~ —     %    2-4^2-^\ 

4d^2jZ^S^L£ta^^lt^J^L  zJZL£d£3Zl  £££.  ' "  '         -   Dollars 


To   First    National    Bank 

New  York  r^L^-k^-S   f^^^^Z^T^^?^?^. 

Cashier 


In  this  draft,  National  Exchange  Bank  is  the  drawer,  First  National 
Bank,  New  York  City  is  the  drawee,  and  K.  L.  Laabs,  the  payee. 

The  payee,  K.  L.  Laabs  would  transfer  this  draft  to  Arnold  &  Co. 
by  a  special  indorsement.  (See  illustration  of  special  indorsement  on 
page   130.) 

The  entries  for  a  bank  draft  are  the  same  as  for  a  check,  with  an 
additional  entry  in  the  books  of  the  remitter  for  the  exchange.  This  may  be 
charged  to  Expense  if"  the  entries  are  few  in  number,  or  it  may  be  charged  to 
Collection  and  Exchange.     You  will  charge  it  to  the  latter  account. 


130 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Ou 


GU. 


d~ 


K.  L.  Laabs'  entries,  Cash  Payments 
I 

Arnold  &  Co.'s  Entries,  Cash  Receipts 


2s* 


Zt/2- 


7^ 


Personal  Sight  Drafts.  Personal  sight  drafts  resemble  bank  drafts 
in  that  they  are  payable  at  once.  They  differ  from  bank  drafts  in  these 
respects: 

1.  The  drawer  and  the  drawee  of  a  sight  draft  are  always  persons. 
The  payee  may  be  a  person  or  a  bank. 

2.  The  drawee  of  a  sight  draft  legally  may  refuse  payment  even  if  he 
owes  the  drawer. 

The  drawee  of  a  bank  draft  cannot  refuse  payment  if  it  has  funds  be- 
longing to  the  drawer  bank. 

3.  A  sight  draft  is  not  usually  accepted  as  cash  until  the  drawee  con- 
sents to  pay  it. 

Sight  Drafts  are  of  two 
kinds,  the  three-party  and  the 
two-party. 

Three-party  Sight  Drafts. 
The  three-party  sight  draft  is 
used  to  save  theinconvenience 
and  risk  of  sending  money. 
If  A  in  Chicago  owes  B  in 
St.  Louis  and  C  in  St.  Louis 


Special  Indorsement 


owes  A,  these 
debts    may   be  can- 
celed   in     whole     or 
in    part    by    means    of    a 
sight    draft.     A    draws  •  a 
draft  on  C  in  favor  of  B  and  re- 
mits it  to  B.      B  presents  it  to  C 
who  pays  it.     In  doing  this  A  has  can- 
celed his  debt  to  B  and  C  has  canceled 
his  debt  to  A. 

A  draft  of  this  kind  should  not  be  used  to 


Bank 


Dollars 


Cashier 


BANK  AND  SIGHT  DRAFTS 


131 


pay  a  debt  unless  the  drawer  is  reasonably  sure  that  the  drawee  will  pay 
the  draft  on  presentation.  He  may  assure  himself  of  this  by  asking  the 
drawee's  permission,  by  notifying  him  that  unless  he  objects,  a  draft  will 
be  drawn  on  him,  or  by  quoting  him  prices  and  selling  him  goods  subject 
to  a  sight  draft. 


Three-Party  Sight  Draft 


%jLa. 


Milwankee,  Wis.,. 


% 


<■? '  1«» 


sG^g 


utJ~^u'^J!^- 


JAY  TO  THE  ORDER  OF 


£>£^2&eazLjbU22  ^/^~s-^y 


.Dollars 


Value  received  and  charge  to  account  of 


To 

No.^£.  Due 


/  yCrr-r^^/^^  (s? 


In  this  draft,  G.  Davis  &  Co.  owe  N.  Wilier  $600  or  more.  N.  Wilier 
owes  E.  C.  Frey  at  least  $600.  Both  of  these  debts  are  canceled  by  this 
sight  draft. 

N.  Wilier  is  the  drawer,  E.  C.  Frey,  the  payee,  and  G.  Davis  &  Co., 
the  drawee.  N.  Wilier  sends  the  draft  to  E.  C.  Frey,  who  presents  it  to 
G.  Davis  &  Co.  When  G.  Davis  &  Co.  pay  it,  the  draft  is  receipted  by 
E.  C.  Frey  and  given  to  them.  Should  G.  Davis  &  Co.  refuse  payment, 
a  legal  step  called  'protesting  the  draft  may  be  taken  and  the  draft  sent 
back  to  the  drawer,  N.  Wilier. 

Drawer's  Entry.  If  N.  Wilier  had  paid  E.  C.  Frey  $600,  he  would  have 
debited  Frey's  account  for  that  amount.  If  G.  Davis  &  Co.  had  paid  N. 
Wilier  $600,  then  their  account  would  have  been  credited.  This  result  is 
accomplished  by  a  journal  entry. 


N.  Willer's  Journal  Entry 


3 


^ 


Co 


GT^^y^-^y,  cms  asi>t>£ 


L 


do 


132 


METROPOLITAN  SYSTEM  OP  BOOKKEEPING 


Payee's  Entry.  If  the  payee,  E.  C.  Frey,  had  received  cash  of  N. 
Wilier,  he  would  have  debited  Cash  and  credited  N.  Wilier.  Instead,  the 
cash  is  received  from  G.  Davis  &  Co.  for  N.  Willer's  account.  The  payee's 
entry  is  made  in  the  cash  book  as  follows: 


E.  C.  Frey's  Cash  Receipts 


fc 


^r 


7?.~£00&^  ^dMrcr~A<Aj?f< 


0  0 


Drawee's  Entry.  If  the  drawee,  G.  Davis  &  Co.  had  paid  N.  Wilier 
on  account,  they  would  have  debited  N.  Wilier  and  credited  Cash.  But 
they  have  paid  E.  C.  Frey  for  N.  Willer's  account.  The  drawee's  entry 
is  made  in  the  cash  book  as  follows: 


G.  Davis  &  Co's  Cash  Payments 


/ftrvr^JT  y^,'^6^/Z^L^  &fa  ^JL»**  <£&$L^ 


C 


GO 


Rules  for  Three-party  Sight  Drafts.  The  Drawer's  Entry  in  the 
journal  when  the  sight  draft  is  drawn  is,  Payee  to  Drawee. 

The  Payee's  Entry  in  the  cash  book  when  he  receives  payment  of 
a  sight  draft  is,  Cash  to  Drawer. 

The  Drawee's  Entry  in  the  cash  book  when  he  pays  a  sight  draft 
is,  Drawer  to  Cash. 

Two-party  Sight  Drafts.  The  most  important  use  of  the"  sight  draft 
is  for  the  purpose  of  obtaining  payments  on  account  or  of  collecting  past 
due  accounts.  When  this  is  done,  the  draft  is  drawn  on  the  customer  or 
debtor  in  favor  of  the  drawer  himself,  or  in  favor  of  a  bank  as  the  drawer's 
agent.     The  drawer  becomes  both  the  drawer  and  the  payee. 

Almost  all  drafts  of  this  character  are  collected  through  banks.  For 
that  reason,  the  bank  is  usually  named  as  the  payee,  but  is  really  only  the 
drawer's  agent  for  collecting  the  draft.  The  draft  may  be  drawn  in  favor 
of  the  drawer,  himself,  and  then  indorsed  to  the  bank. 

The  principal  uses  of  two-party  sight  drafts  are  as  follows: 

1.  To  Collect  Part  of  an  Invoice.  Goods  may  be  sold  on  the  terms, 
sight  draft  for  a  certain  amount.  The  draft  is  drawn  at  the  time  of  the 
sale  and  given  to  a  bank  for  collection.  It  may  be  dated  ahead  or  drawn 
at  sight,  within  a  certain  number  of  days  after  the  date  of  the  sale. 
The  buyer  of  the  goods  knows  that  a  draft  will  be  presented  to  him  for 
payment  and  rarely  refuses  to  pay  it. 

2.  To  Collect  Past  Due  Accounts.  After  a  creditor  has  made  several 
efforts  to  collect  accounts  that  are  past  due,  he  usually  resorts  to  the  sight 
draft  before  giving  the  account  to  an  attorney  or  to  a  collection  agency  for 
collection. 


BANK  AND  SIGHT  DRAFTS  133 

Before  the  draft  is  drawn,  several  statements  of  account,  and,  it  may 
be,  letters  have  been  sent  to  the  debtor  requesting  payment.  If  he  makes 
no  payment  or  gives  no  satisfactory  reason  for  not  making  payment,  the 
last  letter  or  statement  sent  before,  drawing  the  sight  draft  will  contain 
some  statement  similar  to  the  following:  "If  settlement  is  not  made  in 
10  days,  we  will  draw  on  you  through  our  bank  for  the  amount  of  your 
account." 

3.  To  Make  Advance  Collections.  In  some  lines  of  business,  it  is 
a  frequent  thing  to  ship  goods  to  be  sold  on  commission.  The  shipper  of  the 
goods  frequently  draws  at  sight  on  the  merchant  to  whom  he  has  made 
shipment,  for  a  part  of  the  value  of  the  goods  shipped.  This  is  an  advance 
payment,  but  it  is  a  common  custom  and  the  draft  is  usually  paid  when 
presented  unless  the  amount  is  too  large.  This  use  of  the  sight  draft  will 
be  fully  explained  later. 

4.  To  Collect  on  Delivery.  When  goods  are  sent  by  freight  and  the 
money  must  be  paid  before  delivering  the  goods,  a  sight  draft  is  usually 
used  to  make  the  collection.  This  use  of  the  sight  draft  will  also  be  explained 
later. 

A  sight  draft  for  the  purpose  of  collecting  money  is  illustrated. 

Sight  Draft  to  Collect 


/WV7  ^  Milwaukee.  Wis^ /Lf^S=U^.    "> \>        *» 


.PAX  XO  THE  ORDER  OF 


r^zzrzrm.  Dollars 


Value  received  and  charge  to  account  of 
To 


No.i_£jZL  Due^ XJQtfkxtJ&J&frZl&B. 


*£*aau 


W.  E.  Erwin  owes  M.  A.  Arden.  M.  A.  Arden  draws  a  sight  draft 
on  W.  E.  Erwin  in  favor  of  the  National  Exchange  Bank  and  gives  it  to  the 
bank  for  collection.  The  National  Exchange  Bank  sends  it  to  some  bank 
in  Kansas  City  for  collection.  When  the  Kansas  City  bank  makes  collection, 
it  credits  the  Milwaukee  bank.  The  Milwaukee  bank  then  gives  M.  A. 
Arden  credit. 

Banks  rarely  take  sight  drafts  for  deposit.  In  many  cities  they  are 
prohibited  from  doing  so  by  the  rules  of  the  Clearing  House. 

In  your  business  practice  work,  sight  drafts  will  always  be  left  for 
collection.    They  will  never  be  taken  for  deposit. 


134 


METROPOLITAN  SYSTEM  OP  BOOKKEEPING 


Should  the  Kansas  City  bank  fail  to  make  collection,  it  would  return 
the  draft  to  the  Milwaukee  bank  with  the  reason  why  collection  could  not  be 
made  marked  on  a  printed  blank  used  by  banks  for  that  purpose. 

The  draft  is  then  worthless,  but  .the  drawer  must  pay  a  small  charge 
to  the  bank  for  the  expenses  incurred  in  trying  to  make  collection. 

When  the  draft  is  drawn  in  favor  of  the  drawer  or  in  favor  of  a  bank, 
no  entry  is  made  by  the  drawer  until  the  bank  reports  the  draft  collected. 
He  then  makes  an  entry  as  follows: 

Drawee's  Cash  Receipts 


V?cn«/4- 


at£& 


T^t^-ts-z^ny 


CTT^  CZ^Oo/-, 


/J"0 


8. 


The  Drawee's  Entry  is  the  same  as  that  for  a  three-party  draft, 
Drawer  to  Cash. 

Rule  for  the  Drawer  of  a  Two-party  Draft.  The  Drawer's  Entry 
in  the  cash  book  after  the  draft  has  been  collected  is,  Cash  to  Drawee. 

Exercise  33.  Draw  the  necessary  papers  and  make  the  entries  that 
would  be  made  by  each  party  to  the  transaction.  It  is  to  be  understood 
in  each  case  that  the  draft  is  honored. 

January     2.     Draw  a  sight  draft  on  D.  Ware,  Detroit,  Mich.,  in  favor 
of  G.  Laws,  Grand  Rapids,  Mich.,  for  $235,  on  account. 
P.  M.  Mann  orders  an  invoice  of  goods  of  M.  Field  & 
&    Co.,    Chicago,    amounting   to   $437.25.      He   buys 
a  New  York  draft  of  the  National  Exchange  Bank 
on    Second    National    Bank,    New    York,    by    check. 
Exchange  50^.   Write  both  the  check  and  the  bank  draft. 
G.   Smart  sells  an  invoice  of  goods  to  B.   E.   Church, 
Chicago,  amounting  to  $345.75.     By  the  terms  of  the 
sale,   a  sight  draft  is  drawn  for  $200  and  collected 
through  a  bank. 
D.  Porter,  Chicago,  owes  C.  Murray,  Columbus,  Ohio, 
$750   on   account.      L.    E.    Gaines,    Cleveland,    Ohio, 
owes  D.  Porter  $1200,  on  account.     D.  Porter  cancels 
his  indebtedness  to  C.   Murray  by  a  sight  draft  on 
L.  E.  Gaines. 
H.    Land,    St.    Paul,    Minn.,    owes    the    student    $225, 
which  is  long  past  due.     Draw  a  draft  to  collect  the 
account. 
20.     J.  C.  Shore  wishes  to  make  a  remittance  of  $412.60  to 
Corson  &  Co.,  Chicago,  by  a  Chicago  draft.    He  draws 
a  check  on  his  bank  for  the  amount  of  the  payment 
and  pays  the  exchange,  t\r%>  m  money.      Write  both 
the  check  and  the  bank  draft. 


10. 


12. 


18. 


CHAPTER  XVIII 

JOBBING  FURNITURE 

SET  VI 


The  Objects  of  this  set  are  as  follows: 

1.  To  teach  the  use  of  special  columns  in  the  cash  book. 

2.  To  provide  a  large  number  of  transactions  and  of  accounts  so  as  to 
make  the  work  like  actual  business. 

3.  To  teach  the  use  of  new  accounts  that  give  more  detailed  in- 
formation. 

4.  To  give  practice  in  the  handling  of  the  papers  coming  into  the 
business  and  additional  practice  in  making  out  the  necessary  papers  that  go 
out  of  the  business. 

5.  To  give  extended  practical  work  in  dealing  with  the  bank. 

The  Books  of  Entry  to  be  used  in  this  set  are  the  journal,  the  cash 
book,  the  sales  book,  and  the  purchase  book.  In  addition,  an  auxiliary 
book,  the  bill  book,  will  be  kept  in  which  to  record  detailed  information  con- 
cerning notes,  and  later,  time  drafts. 

The  Journal.  The  Journal  will  be  used  in  the  same  way  as  in  previous 
sets.  The  explanation  for  notes  need  not  be  as  complete  as  before,  because 
the  detailed  information  will  be  recorded  in  the  bill  book.  For  a  note 
received  from  D.  E.  Roddy,  the  following  explanation  is  sufficient:  "His 
note  No.  2,  per  bill  book." 

The  Cash  Book.  In  most  wholesale  businesses,  discounts  on  invoices 
of  merchandise  for  prompt  payment  are  frequent.  To  enter  each  one  of 
these  discounts  on  the  opposite  side  of  the  cash  book  makes  a  great  many 
entries  and  a  great  deal  of  posting.  It  has  the  disadvantage,  too,  of  not 
showing  on  the  cash  book  the  actual  cash  received  and  paid  out.  To  avoid 
that,  a  Merchandise  Discount  column  will  be  kept  on  each  side  of  the  cash 
book. 

In  a  study  of  the  Cash  Payments  side  of  the  cash  book,  it  will  be  found 
that  there  are  many  entries  for  Expense.  To  avoid  the  necessity  of  posting 
each  separate  item,  a  special  column  will  be  kept  for  all  amounts  to  be 
charged  to  Expense.     These  entries  will  be  checked  in  the  folio  column 

135 


136 


METROPOLITAN  SYSTEM  OP  BOOKKEEPING 


as  they  are  entered,  and  not  posted  daily, 
posted  monthly  to  the  debit  of  Expense. 


The  total  of  the  column  will  be 


Cash  Receipts,  Sept.  19— 

DATE 

F 

ACCOUNT  TO  BE  CREDITED 

EXPLANATION 

AMOUNT 

TO  BE 

CREDITED 

MDSE. 

DISCOUNT 

DR. 

CASH 
RECEIVED 

Sept. 

1 

8 
12 
15 
18 
22 
22 
29 
30 
30 

V 
V 

J.  A.  Myers,  Capital 
C.  D.  Felton 
F.  G.  Bishop 
F.  E.  Zahn 
W.  H.  Oliver 
Notes  Receivable 
Interest 
Notes  Payable 
Amount  to  be  credited 
Mdse.  Disc.  Total 

Balance 

Investment 

On  account 

Inv.  of  3d,  less  2% 

Inv.  of  5th 

Inv.  of  13th,  less  3% 

B.  I.  Graham's  note  No.  5 

30  days  on  above 

Favor  Nat'l  Ex.  Bank  No.  9 

In  bank 

2000 
375 
436 
175 
218 
450 
2 

1000 

60 
25 

25 

8 
6 

72 
55 

2000 
375 
427 
175 
211 
450 
2 

1000 

28 
60 
70 

25 

4657 

10 

15 

27 

4641 

83 

Oct. 

1828 

48 

1828 

48 

The  first  entry  on  the  Receipts  side  is  checked  because  the  cash  invest- 
ment is  entered  in  the  journal  with  the  other  assets  invested.  It  is  posted 
to  the  credit  of  the  proprietor  as  a  part  of  the  total  in  the  journal.  For 
that  reason,  it  is  not  posted  from  the  cash  book. 

The  entry  on  the  Receipts  side  on  the  12th,  for  F.  G.  Bishop,  is  equiva- 
lent to  the  following: 

Cash  $427.28 

Mdse.  Discount  8.72 

To  F.  G.  Bishop  $436 

Each  similar  entry  on  the  Receipts  side  means  a  debit  of  Cash,  a  debit 
of  Merchandise  Discount,  and  a  credit  for  the  sum  to  the  account  of  the 
person  making  the  payment.  This  is  accomplished  by  posting  the  total 
of  the  Merchandise  Discount  column  to  the  debit  of  Merchandise  Discount. 
The  "Cash  Received"  column  takes  the  place  of  the  debit  side  of  the  cash 
account  in  the  ledger.  No  account  need  be  kept  in  the  ledger  for  Cash,  but 
the  balance  of  the  Cash  book  will  be  taken  for  the  Cash  in  the  trial  balance. 

F.  G.  Bishop  is  credited  for  $436  with  the  notation  in  the  explanatory 
column  Cash  and  Discount,  as  follows : 

F.    G.    Bishop 


19- 

Sept. 


436 


19- 

Sept. 


12 


Cash  &  Disc. 


436 


JOBBING  FURNITURE 


137 


On  the  Payments  side,  the  entries  for  cash  and  discount  may  be  ex- 
plained on  the  same  principle. 

Cash  Payments,  Sept.  19 — 


AMOUNT 

MDSE. 

CASH 

DATE 

F 

ACCOUNT  TO  BE  DEBITED 

EXPLANATION 

TO  BE 

EXPENSE 

DISCOUNT 

DEBITED 

CR. 

Sept. 

2 

V 

Expense 

Rent  to  10/1, 19— 

40 

— 

40 

— 

5 

Advertising 

Herald  Co.'s  bill 

27 

80 

27 

80 

8 

Delivery  Expense 

Auto  Supply  Co.'s  bill 

17 

25 

17 

25 

9 

V 

Expense 

Bill  for  printing 

11 

25 

11 

25 

12 

E.  Henry  &  Co. 

Inv.  of  7th,  less  2% 

875 

60 

17 

51 

858 

09 

15 

Freight  In 

C.  M.  &  St.  P.  bill 

56 

20 

56 

20 

20 

Notes  Payable 

Favor  C.  Irwin,  No.  2 

1000 

— 

1000 

— 

20 

interest 

60  days  on  above 

10 

— 

10 

— 

25 

V 

Expense 

Stamps 

5 

— 

5 

— 

27 

J.  A.  Biller 

Inv.  of  17th,  less  3% 

724 

50 

21 

74 

702 

76 

29 

Interest 

30  days  disc,  on  note  No.  9 

5 

— 

5 

— 

30 
30 
30 
30 
SO 

V 
V 

Expense 

Amount  to  be  debited 

Expense  Total 

Mdse.  Disc.  Total 

Balance 

Salaries 
In  bank 

80 

80 

'  1828 

— 

2716 

35 

= 

136 

25 

39 

25 

48 

4641 

83 

The  total  of  the  Merchandise  Discount  column  is  posted  to  the  credit 
of  the  Merchandise  Discount  account  in  the  ledger.  Each  entry  for  Expense 
is  checked  in  t*he  folio  column  as  it  is  entered  and  is  not  posted  till  the  end 
of  the  month. 

The  Check  Book.  The  left  check  stub  should  give  detailed  information 
about  every  deposit,  collection,  or  charge.  The  total  deposit  or  the  proceeds 
of  the  collection  should  be  entered  on  the  right  check  stub  and  added  to 
the  previous  balance.  Each  check  drawn  will  be  subtracted  on  the  right 
check  stub  from  the  balance  in  the  bank.  The  check  book  will  thus  at  any 
time  show  the  bank  balance.  No  record  is  necessary  on  the  left  check 
stub  for  a  check  drawn,  as  the  details  on  the  right  check  stub  are  sufficient. 
The  record  on  the  left  check  stub  should  always  be  as  nearly  opposite  the 
addition  or  subtraction  on  the  right  check  stub  of  that  particular  record, 
as  possible.      (See  appendix,  page  i,  for  a  different  method) 

Left  Check  Stub  Right  Check  Stub 


Aug. 


G.  L.  Morrison's  note 

collected 
Less  1  / 10%  col. 

Proceeds 


1500  — 
150 


149850 


Aug.  8  Collection 


149850 


How  to  Prove  Cash.  Cash  is  proved  daily  in  actual  business.  To  prove 
cash,  the  "Cash  Received"  column  is  added  in  pencil.  The  "Cash  Paid" 
column  is  added  in  the  same  way.     The  difference  is  the  cash  balance. 


138 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


If  all  cash  received  has  been  deposited,  the  balance  of  the  check  book 
should  equal  the  cash  balance.  This  rarely  happens,  however.  To  this  must 
be  added  the  cash  on  hand  in  the  cash  drawer  whether  in  the  form  of  money 
or  cash  paper,  such  as  checks,  bank  drafts,  or  express  or  U.  S.  money  orders. 

The  Sales  Book.  All  sales  of  merchandise  should  be  entered  in  the 
sales  book.  If  the  sale  is  for  cash  to  a  regular  customer,  the  entry  is  made 
in  the  usual  way  in  the  sales  book  and  posted  to  the  customer's  account. 
His  account  is  then  credited  in  the  cash  book  in  the  usual  way.  If  a  sale 
is  made  for  cash,  less  discount,  the  entry  is  made  in  the  sales  book  in  the 
usual  way  without  deducting  the  discount.  The  entry  for  the  cash  received 
and  the  discount  allowed  is  made  in  the  cash  book  the  same  as  if  the  cash 
had  been  received  some  time  after  the  sale  was  made. 

If  a  sale  is  made  for  cash  to  a  person  who  is  not  a  regular  customer, 
the  entry  is  made  in  the  sales  book  the  same  as  one  to  a  regular  customer 
without  deducting  the  discount,  but  the  entry  is  checked  in  the  folio  column. 
His  account  is  credited  in  the  cash  book  for  the  discount  allowed  and  for 
the  cash  received,  and  checked.  No  ledger  account  is  opened  up.  The 
effect  of  these  two  entries  is  to  debit  Cash  and  Merchandise  Discount  and 
to  credit  Sales.     Sales  is  credited  monthly  for  the  total. 

The  Purchase  Book.  The  two-page  purchase  book  will  be  used  in 
this  sec.  The  left  page  will  be  used  as  a  book  of  entry  in  which  to  enter  all 
purchases  of  merchandise  whether  for  cash  or  on  account.  Cash  purchases 
from  persons  with  whom  the  business  has  regular  dealings  are  entered  and 
posted.  Cash  purchases  from  others  may  be  checked  and  no  account 
opened  up  in  the  ledger.  .  Purchases  is  debited  monthly. 

The  right  page  of  the  purchase  book  will  be  used  as  a  memorandum 
page  to  give  information  concerning  when  the  invoice  should  be  paid  in 
order  to  take  advantage  of  the  discount,  when  it  should  be  paid,  net,  and 
when  and  how  payment  is  made.  The  right  page  is  not  posted,  as  all 
payments  must  be  entered  in  the  cash  book  or  journal  and  posted  from 
these  books. 

Left  Page  Model  Purchase  Book 


INV. 
NO. 

DATE 

F 

NAME 

ADDRESS 

TERMS 

AMOUNT 

1 

2 
3 
4 
5 
6 

Aug. 

1 

7 
10 
15 
20 
25 

V 

S.  Price  &  Co. 
Grover  Fur.  Co. 

C.  L.  White  &  Co. 

D.  G.  Jackson  &  Co. 
M.  Scott  &  Co. 

F.  A.  Vance  Co. 

Toledo,  Ohio 
Des  Moines,  Iowa 
Grand  Rapids,  Mich. 
New  York 
Chicago 
Milwaukee 

Net  30  days 
2/10,  n/30 
Cash,  less  2% 
Note,  30  days 
Sight  dft. 
3/5,  2/10,  n/30 
Purchases  Dr. 

1725 
926 

1736 

1172 
842 

1372 

80 
75 
40 
35 
15 
80 

7776 

25 

Right  Page 


WHEN 

DUE 

PAYMENTS 

REMARKS 

BEST  DISCOUNT 

NET 

WHEN  PAID 

DISCOUNT 

I     AMOUNT  PAID 

Aug. 

31 

Aug. 

31 

1725 

80 

Ck.  No.  86 

Aug. 

17 

Sept. 

6 

17 

18 

54 

908 

21 

Ck.  No.  62 

10 

10 

34 

73 

1701 

67 

Ck.  No.  47 

Aug. 

15 
20 

15 
20 

1172 
842 

35 
15 

Note  at  30  days 
Sight  draft 

30 

Sept. 

24 

30 

41 

18 

1331 

62 

Ck.  No.  81 

JOBBING  FURNITURE  139 

The  Invoice  Book.     Another  method  of  entering  purchases  is  by  using 

Invoice  Book 


/44 


/£ 


/3 


^/'o-^c^-n^i^ct!^ 


M  S^sts?^/. 


Chicago,  III.,  ofsJ?J~  2-<  1  ft  - 


Morrison  &  Davis,  Dr. 

Term.     ^///7/  s^l  ^>^/~3-Tl sTl^S. 


Milwaukee,  Wis., 


ri  >- 


_£19 


M  s^L-J^?^ . 


^rt^^frLSl^  r     V^^V. 


^ 


c-/,^; 


BOUGHT  OF 


L.  N.  Porter  8c  Co. 


i.    -&Cf^^7^f-^r^y>^^ 


New  York,   -^^/?^r  2-a\& — 

Fischer  Furniture  Company 


Sold  To 


C^?^?^ 


Cf^/^^rr-/^-  y//^^r. 


Terms 


Af,   //a,  s7i«e^f~  Q>  a  sK/^&y. 


I    j  ^3 -jr: — r 


S.lt 


'^^tH^AsTV 


— _^_ 


M. oC^^Y, 


/    11 


'/?1^ 


r-&r6sr7^jXf/f> 2-~.     &&  —  < 


* 


'^T7Z^7^?^  //U/Ayf^Cy 


■^*J?^s±4*7Arf^      f/  -  Y-Z£+f7.5 


to       iJ/^^>/r3o/^^^^^^r^^<£^^/   ^Obiy. 


S3  /  6  t/o 


*£/y 


zjr 


3/2- 


£/o 


ZtAPjJ' 


Ctpfkro 


140 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


an  invoice  book.  The  invoice  book  is  a  book  containing  sheets  of  manila 
paper  on  which  the  invoices  of  merchandise  bought  are  pasted.  These 
invoices  are  pasted  down  on  the  lower  corners  only  so  that  the  items  on  the 
preceding  invoice  may  be  examined  if  necessary. 

The  posting  from  the  invoice  book  is  exactly  the  same  as  from  the 
purchase  book.  In  the  invoice  book  illustrated  on  page  139  the  closing 
entry  is  a  debit  to  Purchases.  Daily  the  amount  of  each  invoice  is  posted 
to  the  credit  of  the  account  named  and  the  page  of  the  ledger  put  to  the 
left  of  the  name  of  the  account. 

Advantages  of  the  Invoice  Book.  The  principal  advantages  of  the 
invoice  book  are  the  saving  of  time  in  entering  and  the  advantage  of  having 
the  complete  invoice  in  one  place  for  reference. 

The  Disadvantages  are  many. 

1.  The  invoices  are  of  different  sizes  and  must  be  cut  down  or  folded 
under.    This  gives  the  invoice  book  a  ragged  appearance. 

2.  If  many  invoices  are  received,  the  invoice  book  becomes  heavy  and 
bulky. 

3.  Tne  invoice  book  does  not  show  when  an  invoice  should  be  paid 
to  take  advantage  of  the  discount,  and  when  and  how  it  was  paid. 

4.  The  invoices  are  oftentimes  difficult  to  find  when  they  are  wanted 
for  reference. 

When  a  purchase  book  is  used,  the  invoices  are  filed  in  drawer  files 
alphabetically  or  in  monthly  files  in  the  order  of  their  dates,  so  that  they 
can  easily  be  found. 

The  invoice  book  can  be  used  to  advantage  only  in  a  small  business 
when  few  invoices  are  received. 

This  explanation  is  given  here  so  that  the  pupil  may  understand  how 
it  is  used  in  business. 

The  Bill  Book.     The  bill  book  is  an  auxiliary  book  in  which  records 


Notes 


MODEl 


NO. 

WHEN 
RECEIVED 

MAKER  OR 
DRAWEE 

INDORSER  OR 
DRAWER 

IN  WHOSE 
FAVOR 

FOR  WHAT 
RECEIVED 

WHERE 
PAYABLE 

DATE 

TIME 

1 
2 
3 

19— 
Aug. 

1 

8 
10 

L  Hasson 
C.  N.  Evans 
N.  Reber 

D.  E.  Martin 
C.  Farwell 

D.  E.  Martin 
Martin  &  Kline 
C.  Farwell 

Investment 
On  acct. 
Inv.  of  3d 

Natl.  Ex.  Bk. 
Natl.  Ex.  Bk 
Natl.  Ex.  Bk. 

19— 
July 
Aug. 

22 
6 
9 

60  da. 
30  da. 
15  da. 

Notes 


NO. 

WHEN 
GIVEN 

MAKER  OR 
DRAWEE 

INDORSER  OR 
DRAWER 

IN  WHOSE 
FAVOR 

FOR  WHAT 
GIVEN 

WHERE 
PAYABLE 

DATE 

TIME 

3 

19— 
Aug. 

5 
15 
15 

Martin  &  Kline 
Martin  &  Kline 
Martin  &  Kline 

D.  E.  Martin 

C.  Stone 
Natl.  Ex.  Bk. 
F.  Hanton 

Inv.  of  2d 
Loan 
On  acct. 

Natl.  Ex.  Bk. 
Natl.  Ex.  Bk. 
Natl.  Ex.  Bk. 

1 

19— 
Aug. 

5 
15 
15 

60  da. 
30  da. 
60  da. 

JOBBING  FURNITURE 


141 


are  kept  of  notes  and  time  drafts  received  and  issued,  and  of  their  payment 
or  disposal  to  some  one.  It  is  divided  into  two  parts,  Notes  Receivable  and 
Notes  Payable. 

Notes  Receivable  Book.  In  the  Notes  Receivable  book  is  entered  the 
details  of  all  notes  and  other  written  promises  of  others  received  by  the 
business.  When  these  notes  receivable  are  paid  or  otherwise  disposed  of, 
a  record  is  made  on  the  same  line  with  the  record  made  when  the  note 
receivable  was  received. 

To  Prove  the  Notes  Receivable  Book,  list  the  notes  receivable  unpaid 
and  find  the  total.  This  total  should  agree  with  the  balance  of  the  Notes 
Receivable  account  in  the  ledger.  When  a  note  is  discounted  it  is  paid 
so  far  as  the  business  is  concerned,  as  the  business  has  sold  it  and  no  longer 
has  any  claim  against  the  maker. 

Notes  Payable  Book.  In  this  book  are  recorded  the  details  of  all 
notes  and  other  written  promises  issued  by  the  business.  Payments  are 
recorded  in  the  same  way  as  for  Notes  Receivable.  Prove  the  Notes 
Payable  book  by  listing  the  unpaid  notes  payable.  The  total  should  agree 
with  the  balance  of  the  Notes  Payable  account  in  the  ledger. 

SET  VI.     (Transactions  for  August  1-15) 

August  1 

D.  E.  Martin  and  H.  L.  Kline  have  today  formed  a  copartnership 
agreement  under  the  firm  name  of  Martin  &  Kline,  to  engage  in  the  Jobbing 
Furniture  business  at  435  State  St. 

Receivable 


Bill 

BOOK 

WHEN  DDE 

AMOUNT 

INT. 

BATE 

WHEN  AND  HOW  DISPOSED  OP 

LEFT  FOR 
COLLECTION 

DATE  PAID 

1 

2 

3 

4  |  5  |  6 

7|  8 

9 

10 

11 

12 

REMARKS 

19- 
19- 

19- 

24 

20 
5 

2000 
375 
218 

80 
15 

6% 
6% 

Sept. 

15 

Sept. 
Aug. 

20 

5 

14 

At  bank.  Ink  $20 

By  check 

Disc,  at  bank  36c. 

Payable 


INT. 
RATE 

WHEN  AND  HOW  DISPOSED  OF 

AMOUNT 

DATE  PAID 

1 

2  |  3 

4  |  5 

6 

7  |  8 

9 

10  |  11  |  12 

19- 
19- 
19- 

14 

4 
14 

1178 

1500 

750 

25 

6% 

Oct 

Sept. 
Aug. 

4 
14 
27 

Chgd.  at  bank.    Int.  $11.78 
8/15  Disc,  at  bank.  Disc.  $7.50 
Prepaid  by  check.  Disc.$6.00 

142 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Selling  Price  Lists  for  Set  VI,  August  and  September 


Brass  Bedstead 

B.  E.  Maple  Dresser. 
Felt  Mattress 


Hair  Mattress 

Kitchen  Cabinet. .   . . 
Mahogany  Chiffonier. 


Mahogany  Dresser 

Mahogany  Dressing  Table. 
Mahogany  Lady's  Desk.. . . 


1 


17.25 
15.85 

7.75 

9.50 

20.85 


29.00 
18.10 
12.75 


17.90 

16.35 

5.95 


8.40 

9.50 

21.35 


29.00 
18.90 
13.05 


17.00 
16.40 
5.95 


8.45 

9.50 

21.50 


29.00 
18.50 
12.55 


7     |      8 


10 


17.85 
15.90 
5.95 


7.80 

9.50 

19.70 


29.00 
18.95 
12.70 


17.35 
16.25 
5.95 


7.70 

9.50 

20.75 


29.00 
18.30 
13.10 


17.15 

15.75 

5.95 


7.60 

9.50 

19.75 


29.00 
18.80 
13.35 


21 


17.40 

16.05 

5.95 


7.90 

9.50 

21.20 


29.00 
18.85 
12.50 


11 
17.10 
15.70 

5.95 


8.30 

9.50 

19.85 


29.00 
18.05 
13.20 


12 


17.70 

16.30 

5.95 


7.95 

9.50 

21.25 


29.00 
18.40 
13.30 


Mahogany  Music  Cabinet- 
Mahogany  Parlor  Suite 

Mahogany  Parlor  Table . . . 


5.60     5.50 

112.50112.95 

11.15   11.15 


5.25 

112.30 

11.15 


6.00 

113.05 

11.15 


5.65 

112.90 

11.15 


5.45 

113.10 

11.15 


5 

112 

11. 


30  5.35 
40112.80 
15   11.15 


5.95 

112.35 

11.15 


5.40 

112.75 

11.15 


Mahogany  Rocker. 
Oak  Chamber  Set.. 
Oak  Davenport.. . . 


8.95 
45.00 
23.40 


8.95 
45.70 
23.80 


8.95 
42.50 
21.90 


8.95 
45.75 
23.50 


8.95 
45.45 
21.80 


8.95 
45.10 
23.45 


8.95 
45.05 
23.55 


8.95 
45.60 
23.90 


8.95 
45.15 
21.75 


Oak  Desk  Chair. . 
Oak  Dining  Chair. 
Oak  Dining  Table. 


2.85 

2.15 

21.25 


3.30 

2.15 

21.25 


3.40 

2.15 

21.25 


2.90 

2.15 

21.25 


3.10 
2.15 

21.25 


3.15 

2.15 

21.25 


2.70 

2.15 

21.25 


3.00 

2.15 

21.25 


2.80 

2.15 

21.25 


Oak  Library  Table. 

Oak  Sideboard 

Morris  Chair 


13.50 
25.30 
22  60 


13.50 
25.45 
22.80 


13.50 
24.70 
22.75 


13.50 
24.95 
23.00 


13.50 
25.25 
22.50 


13.50 
24.80 
22.65 


13.50 
25.55 
22.70 


13.50 
25.15 
22.45 


13.50 
24.85 
22.90 


Turkish  Rocker 

C.  Walnut  Bedstead 

C.  Walnut  Chamber  Set. 


27.50 
25.85 
125.00 


27.90 
26.45 
126.00 


27.20 

26.80 

135.00 


27.10 

25.90 

140.00 


27.45 
26.50 
127  00 


27. 

26 

136 


27.35 
26.00 
128.00 


27 
26 
139 


27.15 

25.95 

129.00 


27.95 

26.60 

130.00 


27.30 
26.65 
138.00 


Selling  Price  Lists,  for  Set  VI,  August  and  September  (Continued) 


13 


14 


15 


16 


17    |    18    j     19 


20 


21 


22 


23 


24         25 


Brass  Bedstead 

B.  E.  Maple  Dresser. 
Felt  Mattress 


17.45 

16.10 

5.95 


17.20 
15.60 
5.95 


16.85 

16.55 

5.95 


17.50 

16.15 

5.95 


16.95 

15.55 

5  95 


17.55 

16.20 

5.95 


16.80 

16.45 

5.95 


17.75 

16.25 

5.95 


17.60 

15.65 

5.95 


17.80 

16.50 

5.95 


16.90 

16.30 

5.95 


17.65 

15.60 

5.95 


18.00 

14.95 

5.95 


Hair  Mattress 

Kitchen  Cabinet 

Mahogany  Chiffonier. 


8.00 

9.50 

20.95 


7.25 

9.50 

19.80 


7.30 

9.50 

20.90 


8.05 

9.50 

19.85 


7.40 

9.50 

19.95 


7.55 

9.50 

21.05 


8.10 

9.50 

18.85 


7.45 
9.50 
19.90 


8.25 

9.50 

21.10 


8.15 

9.50 

21.45 


7.50 

9.50 

21.55 


8.20 

9.50 

21.15 


8.45 
•  9.50 
18.90 


Mahogany  Dresser 

Mahogany  Dressing  Table. 
Mahogany  Lady's  Desk.. . . 


29.00 
18.05 
13.25 


29.00 
19.10 
13.40 


29.00 
18.75 
13.60 


29.00 
19.15 
12.95 


29.00 
18.60 
13.55 


Mahogany  Music  Cabinet. 

Mahogany  Parlor  Suite 

Mahogany  Parlor  Table . . . 


5.70 

113.30 

11.15 


6.15 

113.50 

11.15 


6.20 

112.70 

11.15 


5.80 

113.15 

11.15 


5.55 

113.35 

11.15 


29.00 
18.10 
12.90 
5.75 
113.45 
11.15 


29.00 
18.25 
13.65 


6.20 

112.65 

11.15 


29.00 
18.70 
13.45 
"5.75 
112.55 
11.15 


29.00 
18.15 
12.80 


29.00 
18.65 
13.70 


29.00 
18.20 
13.50 


29.00 
18.50 
12.85 


29.00 
19.15 
13.75 


5.95 

113.20 

11.15 


6.10 

113.40 

11.15 


5.60 

112.60 

11.15 


5.65 

113.25 

11  15 


6.25 

113.85 

11.15 


Mahogany  Rocker. 
Oak  Chamber  Set- 
Oak  Davenport 


8.95 
46.05 
21.50 


8.95 
44.80 
21.30 


8.95 
45.20 
23.60 


8.95 
45.40 
21.40 


8.95 
44.95 
21.65 


8.95 
45.25 
21.55 


8.95 
45.85 
23.65 


8.95 
44.90 
23.95 


8.95 
45.30 
21.50 


Oak  Desk  Chair. . . 
Oak  Dining  Chair.. 
Oak  Dining  Table. 


3.20 

2.15 

21.25 


2.95 

2.15 

21.25 


3.05 

2.15 

21.25 


2.95 

2.15 

21.25 


3.10 

2.15 

21.25 


3.05 

2.15 

21.25 


3.35 

2.15 

21.25 


Oak  Library  Table. 

Oak  Sideboard 

Morris  Chair 


13.50 
25.75 
21.90 


13.50 
24.60 
21.70 


13.50 
25.10 
22.35 


13.50 
25.70 
21.95 


13.50 
24.65 
21.80 


13.50 
25.05 
22.55 


13.50 
24.90 
21.85 


3.15 
2.15 
21.25 
13.50 
25.00 
23.10 


2.90 

2.15 

21.25 


13.50 
25.35 

21.50 


8.95 
44.75 
23.70 


3.20 

2.15 

21.25 


8.95 

45.90 

21.45 

3.00 

2.15 

21.25 


8.95 
45.35 
23.75 


8.95 
46.10 
21.60 


13.50 
25.60 
22  30 


13.50 
24.95 
21.65 


3.25 

2.15 

21.25 


3.35 

2.15 

21.25 


13.50 

25.40 
23.15 


13.50 
25.60 
22.25 


Turkish  Rocker 

C.  Walnut  Bedstead 

C.  Walnut  Chamber  Set. 


27.55 
26.40 
120.00 


28.25 
26.95 
134.00 


26.75 
28.10 
116.00 


26.80 
26.05 
119.00 


27.70 

26.25 

121.00 


28.10 
27.05 
131.00 


27.65 
26.90 
124.00 


27.25 
26.10 
132.00 


26.90 
26.20 
118.00 


28.05 
26.35 
123.00 


27.60 
26.85 
117.00 


27.05 
26.15 
133.00 


27.75 
26.30 
122.00 


JOBBING  FURNITURE  143 


August  1.  D.  E.  Martin  invests  the  following  from  the  business 
which  he  has  been  conducting  at  435  State  St. : 

Stock  of  furniture  inventoried  at  $3725.25 
Office  and  store  fixtures  inventoried  at  $374.75 
1  Chase  delivery  truck,  $1375 
Cash,  $2525 
H.  L.  Kline  invests  the  following: 

D.  L.  Ellery's  note  for  $2000,  dated  July  17,  payable  60  days 

after  date,  with  interest  at  6% 
Cash,  $5995 
The  firm  has  employed  the  student  as  bookkeeper  and  stenographer 
at  a  salary  of  $50  per  month,  payable  monthly. 

Take  the  Articles  of  Copartnership  from  the  Incoming  Papers  and 
study  them.  They  have  been  made  out  in  triplicate  and  each  copy  signed 
by  each  partner.  The  original  is  received  by  the  business,  and  a  duplicate 
is  given  to  each  of  the  partners. 

How  much  does  D.  E.  Martin  invest? 
How  much  does  H.  L.  Kline  invest? 
^         What  provisions  are  made  in  reference  to  withdrawals  from  investments? 

What  provisions  are  made  in  reference  to  monthly  withdrawals  and  in  reference  to  withdrawals  of 
profits? 

What  is  to  be  done  with  any  part  of  the  net  profits  not  withdrawn? 
What  is  said  about  the  right  of  a  partner  to  become  a  surety  or  guarantor? 

After  you  have  studied  the  articles  of  copartnership  so  that  you  are 
able  to  answer  the  above  questions  without  referring  to  the  agreement,  file 
the  articles  of  copartnership  in  the  Miscellaneous  file. 

Entries.  Make  a  memorandum  in  the  journal  to  record  the  forma- 
tion of  the  copartnership  and  each  partner's  investment. 

Make  a  journal  entry  for  D.  E.  Martin's  investments.  Include  the 
cash  in  this  entry,  and  check  it  in  the  folio  column.  You  must  name  an 
account  for  each  item  invested.  Explain  each  item  on  the  line  with  the 
name  of  the  account. 

Take  D.  E.  Martin's  check  from  the  Incoming  Papers  and  enter 
it  in  the  cash  book  or  on  a  manuscript  cash  book  as  the  teacher  may  direct. 
Place  the  check  in  the  Cash  envelope.  The  Cash  envelope  will  be  used 
for  all  money  and  for  all  commercial  papers  that  will  be  taken  by  the  bank 
for  deposit. 

Take  the  note  and  check  for  H.  L.  Kline's  investment  from  the  Incom- 
ing Papers.  Notice  that  the  note  bears  interest  and  is  worth  more 
than  its  face  value.     Compute  the  interest. 

Make  the  entry  for  his  investment.  Your  entry  should  have  three 
debits.  The  cash  must  be  entered  in  both  the  journal  and  cash  book  and 
checked.  If  your  entries  are  correct,  the  credits  to  D.  E.  Martin,  Capital 
and  to  H.  L.  Kline,  Capital  should  be  the  same. 


144  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Make  a  memorandum  in  the  journal  recording  the  employment  of  the 
student  as  bookkeeper  and  stenographer  at  $50  per  month. 

Opening  the  Bank  Account.  Mr.  Martin  has,  by  agreement,  been 
placed  in  charge  of  the  finances  of  the  partnership.  He  has  arranged 
to  open  an  account  with  the  National  Exchange  Bank  in  the  name  of  Martin 
&  Kline.  All  deposits  are  to  be  made  in  the  firm  name  and  all  checks  are 
to  be  drawn  by  the  student  and  signed  Martin  &  Kline  by  Student's  name. 

Take  the  signature  card  from  your  envelope  and  sign  it  just  as  you 
will  sign  checks.  Practice  the  signature  before  writing  it  on  the  signature 
card.  Fill  in  the  other  information  called  for.  Hand  it  to  your  teacher. 
You  must  sign  checks  in  this  way  each  time.  Your  teacher  will  refuse 
checks  that  are  not  properly  signed. 

Deposit  the  checks  on  hand.  Make  out  the  usual  deposit  ticket? 
listing  each  check  and  finding  the  total.  Indorse  each  check  on  the  back 
about  an  inch  from  the  left  hand  end.  All  indorsements  should  be  the 
same  as  the  signature  on  the  signature  card. 

Record  this  deposit  in  detail  on  the  cover  of  the  check  book  opposite 
to  check  stub  No.  1.    Make  the  record  as  follows: 

Aug.  1  Deposit: 
Checks: 

D.  E.  Martin  $2525 

H.  L.  Kline  5995 

$8520. 

On  the  right  check  stub,  write,  Aug.  1,  Deposit  $8520. 

The  firm  has  leased  the  ground  floor  and  basement  of  the  store  building 
at  435  State  St.,  from  J.  A.  Winton.  Take  the  lease  from  the  Incoming 
Papers  and  study  it. 

The  one  who  owns  the  building  is  called  the  lessor  and  the  one  to  whom 
the  lease  is  given  is  called  the  lessee. 

Who  is  the  lessor? 

Who  is  the  lessee? 

For  how  long  a  time  is  the  property  leased? 

How  much  rent  is  to  be  paid? 

How  often? 

What  would  the  firm  have  to  do  if  it  wished  to  move  before  the  expiration  of  the  lease? 

If  a  window  should  be  broken,  who  would  have  to  pay  for  a  new  one? 

If  the  roof  should  leak,  would  the  lessee  have  to  repair  it? 

Pay  the  rent  by  check.  Place  this  check  and  all  others  issued  in  the 
Bank  envelope  unless  otherwise  instructed.  In  business,  the  check  would 
be  cashed  or  deposited  by  the  payee.  It  would  be  held  by  the  bank  till 
the  end  of  the  month,  and  then  returned  to  the  depositor  with  a  statement 
of  his  account.  The  checks  are  placed  in  the  Bank  envelope  so  as  to  be  in 
one  place  and  ready  for  the  making  out  of  the  bank  statement  at  the  end 
of  the  month. 


JOBBING  FURNITURE  145 

File  the  lease  in  the  Miscellaneous  file  after  you  understand  its  pro- 
visions. 

August  3.  This  bill  for  blank  books  is  received  from  the  Baum  Sta- 
tionery Co.     Pay  it  by  check. 

J.  C.  Reed,  City,  orders: 

12  Brass  Bedsteads 

4  Mahogany  Parlor  Suites 
6  Mahogany  Parlor  Tables 
8  Oak  Library  Tables 

Terms:     On  account. 

Make  out  the  invoice  and  make  the  entry. 

Whenever  an  order  is  received,  an  invoice  must  be  made  out  and  the 
entry  made  in  the  sales  book.  The  invoice  should  be  folded  lengthwise 
with  the  amounts  outside,  and  placed  in  the  Outgoing  Papers  envelope. 

Special  Instructions:  The  making  out  of  the  business  papers  is  a  very 
important  part  of  your  work  in  this  set.  The  penmanship  should  be  the 
best;  every  figure  should  be  plain  and  distinct.  The  extensions  on  invoices 
should  be  carefully  figured  before  entering  the  sale  in  the  sales  book.  You 
should  learn  to  do  the  extending  mentally,  as  far  as  possible.  No  words  or 
figures  should  be  marked  over.  Your  teacher  will  refuse  all  papers  that 
have  erasures  or  words  or  figures  marked  over  on  them.  If  an  error  is 
made,  rule  it  out  in  red  ink  and  correct  it  above. 

C.  P.  Baker  &  Co.,  City,  order: 
10  Kitchen  Cabinets 
8  Mahogany  Dressers 

5  Oak  Library  Tables 
Terms:     3/5,  2/10,  net  30  days 

This  invoice  is  received  from  the  Northwestern  Furniture  Co.  Take 
the  invoice  from  the  Incoming  Papers  and  check  the  extensions  in  pencil. 
Enter  it  in  the  purchase  book.  In  the  column  for  "Best  Discount",  write 
Aug.  13,  and  in  the  column  for  "Net,"  write  Sept.  2.  File  the  invoice  in  the 
Unpaid  Bills  file,  after  folding  it  lengthwise  with  the  amounts  outside. 

Engage  Chas.  Lannon  as  deliveryman  at  $45  per  month,  payable 
monthly. 

Make  a  journal  memorandum. 

August  4.  The  firm  has  taken  out  an  insurance  policy  on  its  stock  of 
furniture  and  on  the  office  and  store  fixtures. 

Take  the  insurance  policy  from  the  Incoming  Papers  and  study  it. 
This  is  a  standard  insurance  policy  prescribed  by  the  laws  of  Wisconsin. 
The  standard  policy  of  other  states  is  similar.  The  company  that  issues 
the  policy  is  called  the  insurer;  the  one  to  whom  it  is  issued  is  called  the 
insured. 

In  what  company  has  the  firm  insured? 

What  is  the  extent  of  the  company's  liability  in  case  of  loss  by  fire?    This  is  called  the  risk. 

How  much  must  you  pay  the  company  for  carrying  this  risk?    This  is  called  the  premium. 


146  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

How  is  the  amount  of  the  premium  found? 

Can  the  firm  cancel  this  policy  at  any  time?    Would  it  get  back  any  part  of  the  premium? 
Can  the  insurance  company  cancel  this  policy  at  any  time?    Would  the  firm  get  back  any  part  of  the 
premium? 

What  must  the  firm  do  in  case  of  loss  by  fire  in  order  to  obtain  the  insurance? 
How  is  the  fire  loss  adjusted? 

After  you  are  able  to  answer  these  questions,  file  the  insurance  policy 
in  the  Miscellaneous  file.  Make  a  brief  memorandum  in  the  journal. 
Take  the  bill  for  the  insurance  premium  from  the  Incoming  Papers.  You 
will  notice  that  it  includes  the  insurance  on  the  motor  truck,  which  would 
be  recorded  in  a  separate  policy.  Pay  the  bill  by  check.  Charge  the 
Insurance  account. 

The  Insurance  Account  is  debited  for  the  premiums  paid  for  insuring. 
The  inventory,  the  value  of  the  unexpired  insurance,  is  found  by  taking 
11/12  of  the  premium  paid  at  the  end  of  the  first  month,  10/12  at  the 
end  of  the  second,  etc.  The  difference  between  the  insurance  premium 
paid  and  the  inventory  is  the  amount  used,  which  is  a  loss.  The  unex- 
pired insurance  is,  thus,  an  asset,  and  the  expired  premium  is  a  nominal 
element,  a  loss. 

Chas.  Osgood,  City,  orders: 

8  Mahogany  Chiffoniers 

5  Mahogany  Music  Cabinets 

6  Mahogany  Rockers 
Terms:    on  account. 

August  5.  This  invoice  is  received  from  Simmons,  Gardner  &  Co. 
Take  the   invoice  from   the    Incoming   Papers,    check  it,   enter,   and   file. 

When  should  it  be  paid? 

In  what  file  should  the  invoice  be  placed? 

Are  you  thinking  out  each  transaction?  Do  not  be  satisfied  to  make 
out  the  necessary  papers  or  to  file  the  papers  properly.  You  must  under- 
stand each  entry.  You  must  think  out  each  transaction  to  see  how  it  is 
similar  to  other  transactions  that  you  have  had,  how  different,  and  what 
the  debit  and  credit  effect  is. 

D.  C.  Lanning,  City,  orders: 

12  Oak  Dining  Chairs 

5  Mahogany  Lady's  Desks 

6  C.  Walnut  Chamber  Sets 
Terms:     account,  30  days. 

B.  L.  Duncer,  City,  orders: 

8  Kitchen  Cabinets 
12  Oak  Dining  Chairs 
Terms:     cash. 

Make  out  the  invoice  and  make  the  usual  entry  in  the  sales  book. 
Take  the  check  from  the  Incoming  Papers  and  make  the  entry  for  it. 

Why  is  this  sale  entered  in  the  sales  book?  What  account  is  debited  in  the  sales  book?  What  ac- 
count should  be  credited  in  the  cash  book?    In  what  envelope  should  the  check  be  placed? 


JOBBING  FURNITURE  147 

August  6.  Take  the  coal  bill  from  the  Western  Coal  Co.  from  the 
Incoming  Papers  and  check  the  extension.  Pay  it  by  check  and  make  the 
entry.     File  the  bill  in  the  Paid  Bills  file. 

Have  you  checked  the  entry  in  the  cash  book  so  that  you  will  not  post  it  until  the  end  of  the  month 
in  total? 

Receive  this  check  from  J.  C.  Reed,  to  apply  on  account.  Make  the 
usual  entry  for  this  transaction. 

This  invoice  is  received  from  the  Atlas  Parlor  Furniture  Co.  Notice 
the  terms.  They  have  drawn  on  us  at  sight.  The  draft  will  be  presented 
through  the  bank  later.  Simply  make  the  entry  in  the  purchase  book  now. 
Do  not  mark  it  paid  until  you  pay  the  sight  draft. 

Write  a  check  in  favor  of  cash  for  $2  to  purchase  stamps. 

In  what  column  of  the  cash  book  should  this  amount  be  entered? 

C.  L.  Larson,  City,  orders: 

6  Mahogany  Dressers 
12  Mahogany  Parlor  Tables 

6  Oak  Library  Tables 
Terms:     2/10,  net  30  days. 

Should  the  discount  be  deducted  in  the  sales  book?    Why? 

August  7.  This  bill  for  filing  cabinets  is  received  from  the  H.  H.  West 
Co.  Take  the  bill  from  the  Incoming  Papers  and  pay  it  by  check.  This 
adds  to  the  value  of  your  office  equipment.  Do  not  enter  it  in  the  Expense 
column. 

Hereafter,  when  you  are  told  that  an  invoice,  a  bill,  a  check  or  other 
paper  is  received,  you  will  find  it  in  the  Incoming  Papers  without  specific 
reference  to  it.  You  must  make  the  proper  entry  for  each  transaction. 
All  payments  are  made  by  check. 

Pay  Simmons,  Gardner  &  Co.,  on  account,  $500. 

H.  E.  King,  City,  orders: 

12  Brass  Bedsteads 

8  B.  E.  Maple  Dressers 
10  Mahogany  Chiffoniers 
4  Mahogany  Parlor  Suites 

Terms:     on  account. 

Make  the  entry  on  a  new  page  of  your  sales  book.  Always  leave  two 
lines  at  the  bottom  of  the  page  for  forwarding.  On  the  first  line  below 
the  heavy  lines  at  the  top  of  the  next  page  write  Forward  and  the  sum 
of  the  previous  page.  This  may  be  put  in  pencil  until  you  know  that  your 
amounts  are  correct.  The  date  of  this  sale,  August  7,  should  be  written 
on  the  first  or  heading  line  of  the  page. 

Deposit  all  checks  on  hand.  Do  not  forget  to  indorse  all  checks. 
You  must  enter  the  details  of  this  deposit*  on  the  left  check  stub  opposite  the 
addition  on  the  right  check  stub. 

August  8.     Receive  this  check  of   C.    P.  Baker  &  Co.,  for  invoice  of 


148  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

the  3d,  less  3%.  Turn  to  your  sales  book.  Compute  the  discount  on  the 
sale.  If  the  discount  is  an  amount  with  a  fraction  one-half  a  cent  or  more, 
another  cent  must  be  added  to  the  discount.  If  you  compute  it  correctly, 
the  check  should  equal  the  amount  of  the  invoice  less  the  discount.  Make 
the  entry  on  the  Cash  Receipts  like  the  following: 

August  8.     D.  E.  Hines  |  Inv.  of  the  3d,  less  3%  |  425.  |  12.75  |  412.25 
This  is  equivalent  to  the  following: 

Cash  $412.25 

Mdse.  Discount  12.75 

To  D.  E.  Hines  $425 

The  bank  presents  a  sight  draft  drawn  by  the  Atlas  Parlor  Furniture 
Co.  for  the  amount  of  the  invoice  received  on  the  7th.  Compare  the  amount 
of  the  draft  with  the  amount  of  your  entry  for  the  invoice.  If  it  is  correct, 
pay  it  by  a  check  in  favor  of  the  bank.  Take  the  draft  to  the  bank  with 
the  check  and  have  the  draft  canceled.  Place  the  check  in  the  Bank 
envelope. 

Receive  this  check  from  Chas.  Osgood,  to  apply  on  account. 
Prove  cash.     Submit  your  proof,  your  cash  book,  and  your  check  book 
to  your  teacher  for  correction. 

August  10.     D.  G.  Paxton,  City,  orders: 
5  Kitchen  Cabinets 
10  Mahogany  Rockers 
5  Mahogany  Dressers 
Terms:     cash,  less  3%. 

You  receive  the  check  in  payment  of  the  invoice,  less  discount. 
Fill  the  order.     Deduct  the  discount  on  the  invoice  so  as  to  show  how 
much  was  paid.     Receipt  the  invoice. 

Enter  the  invoice  in  the  sales  book  without  deducting  the  discount. 
Enter  the  cash  received  and  the  discount  allowed  in  the  cash  book. 
This  is  just  as  much  an  allowance  of  merchandise  discount  as  if  the  sale 
had  been  made  on  one  day  and  the  cash  received  on  another.     The  entry 
is  made  like  the  transaction  illustrated  on  the  8th. 
J.  G.  Hull,  City,  orders: 

10  Brass  Bedsteads 

4  C.  Walnut  Bedsteads 

5  Mahogany  Parlor  Suites 
Terms:     account,  30  days. 

August  11.     Receive  this  invoice  of  Bishop  &   Co.     Do  not  forget  to 
check  the  extensions  and  total  before  making  the  entry. 
J.  A.  Reiss  &  Co.,  City,  order: 

12  Felt  Mattresses 

10  Mahogany  Parlof  Tables 
Terms:     2/10,  net  30  days. 
Deposit  all  the  checks  on  hand. 


JOBBING  FURNITURE  149 

Have  you  entered  the  details  of  the  deposit  on  the  left  check  stub  and 
added  the  amount  deposited  to  the  previous  balance? 

August  12.  Pay  this  advertising  bill  of  the  Sentinel  Co.  Charge  it  to 
Advertising. 

Advertising  Account.  A  separate  account  will  be  kept  with  advertising 
to  show  the  amount  expended  for  this  purpose.  To  this  account  will  be 
charged  advertising  in  a  newspaper,  magazine,  or  trade  journal,  and  adver- 
tising in  the  form  of  circulars,  bill  board  signs,  painting  signs  on  fences, 
etc.  When  circulars  are  sent  out  to  the  trade  to  advertise  the  business, 
the  advertising  cost  includes  not  only  the  cost  of  the  circulars,  but  also  the 
cost  of  the  envelopes,  of  the  postage,  and  the  cost  of  the  time  of  the  stenog- 
rapher or  clerk  for  filling  in  and  addressing. 

Give  Simmons,  Gardner  &  Co.  a  note  for  $250,  payable  15  days  after 
date,  with  interest  at  6%,  on  account. 

Make  the  entry  in  the  journal  and  the  record  in  the  bill  book.  Do  not 
write  anything  in  any  of  the  columns  to  the  right  of  the  "Interest  Rate" 
column  of  the  bill  book,    Place  the  note  in  the  Outgoing  Papers  envelope. 

Receive  this  invoice  of  the  Klingman  Furniture  Co.  Notice  that  the 
terms  of  the  invoice  require  payment  to  be  made  at  once  by  N.  Y.  draft. 

Enter  the  invoice  in  the  purchase  book  in  the  usual  way,  without 
deducting  the  3%. 

Buy  a  N.  Y.  draft  from  your  bank  for  the  net  amount  of  the  invoice. 
Exchange  50^.  Pay  for  the  draft  and  exchange  by  check.  Take  the  N.  Y. 
draft  from  the  Incoming  Papers,  indorse  it  properly,  and  place  it  in  the 
Outgoing  Papers  envelope.     Place  the  check  in  the  Bank  envelope. 

Make  an  entry  for  the  remittance  and  one  for  the  exchange.  Charge 
the  exchange  to  Collection  and  Exchange. 

Have  you  debited  the  Klingman  Furniture  Co.'s  account  for  the  same  amount  with  which  you  credit- 
ed their  account  in  the  purchase  book?    Does  the  amount  of  cash  paid  agree  with  the  amount  of  the  check? 

Pay  this  bill  of  the  Phoenix  Printing  Co. 

August  13.  Pay  the  Northwestern  Furniture  Co.  for  invoice  of  the 
4th,  less  discount.  Refer  to  the  purchase  book,  and  compute  the  discount. 
Write  a  check  in  payment.  You  will  find  an  entry  similar  to  this  one  in  the 
Model  Cash  Book  for  this  set.  Do  not  forget  to  record  the  payment  of 
the  invoice  in  the  purchase  book.  The  invoice  has  been  filed  in  the 
Unpaid  Bills  file.  What  should  be  done  with  it  now? 
A.  Dorris,  City,  orders: 

8  Brass  Bedsteads 
10  Hair  Mattresses 
6  Oak  Chamber  Sets 
Terms:    note  for  $250,  payable  in  10  days,  with  interest  at  6%;  balance 

on  account. 
Enter  the  invoice  in  the  sales  book  for  the  full  amount.     Make  the 
proper  entry  and  record  for  the  note. 


150  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

August  14.  Pay  this  freight  bill  for  freight  on  incoming  goods.  Make 
the  check  payable  to  the  railroad  company.  This  is  not  a  charge  to  expense. 
It  is  an  added  cost  of  the  goods.     Charge  Freight  In. 

Give  each  partner  a  check  for  $25  for  personal  use.  These  with- 
drawals must  not  be  charged  to  the  capital  accounts  of  the  partners. 
Nothing  should  be  entered  in  the  capital  accounts  except  permanent 
investments  and  withdrawals  of  part  of  the  capital.  These  withdrawals 
are  in  anticipation  of  profits  and  are  not  withdrawals  of  capital. 

Partners'  Personal  Accounts.  Personal  accounts  of  partners  keep 
the  temporary  transactions  of  the  partners  separate  and  distinct  from  the 
permanent  transactions. 

Debit  a  partner's  personal  account  for  all  withdrawals  of  money, 
merchandise,  or  other  assets  and  for  any  bills  paid  by  the  business  for  the 
partner. 

Debit  a  partner's  personal  account  for  his  share  of  the  net  loss  when 
closing  the  books. 

Credit  a  partner's  personal  account  for  all  salaries  earned  and  not 
paid,  for  temporary  loans  to  the  business,  and  for  all  bills  of  the  firm  paid  out 
of  a  partner's  private  funds. 

Credit  a  partner's  personal  account  for  his  share  of  the  net  profits  when 
closing  the  books. 

A  partner's  personal  account  may  temporarily  show  an  asset  or  a 
liability,  but  does  not  appear  in  that  way  in  the  statement  of  Assets  and 
Liabilities.  It  is  added  to  the  capital  account,  if  a  credit  balance,  and 
subtracted  from  it  if  a  debit  balance. 

Charge  these  checks  to  D.  E.  Martin,  Personal  and  H.  L.  Kline, 
Personal,  respectively. 

August  15.  Receive  this  check  of  C.  L.  Larson  for  the  invoice  of  the 
6th,  less  discount. 

Have  you  made  the  entry  so  as  to  balance  the  debit  to  C.  L.  Larson's  account  from  the  sales  book? 

First  Report.  Take  a  report  blank  from  your  envelope.  First,  prove 
cash  and  record  it  on  the  report  blank.  Sort  the  papers  in  the  Outgoing 
Papers  envelope,  list  them  on  the  report  under  the  proper  headings  in  the 
order  of  the  dates,  and  find  the  sum  of  each  kind.  List  the  checks  in  the 
Bank  envelope  in  the  order  of  the  numbers  and  find  the  total. 

Hand  in  your  report,  the  Outgoing  Papers  envelope,  and  the  Bank 
envelope.  Inspect  all  your  papers  before  handing  them  in  to  see  that 
there  are  no  incomplete  or  carelessly  written  papers.  There  should  be 
no  erasures.  The  outgoing  papers  that  are  correct  will  be  kept  by  your 
teacher.  Those  that  are  incorrect  will  be  returned  for  correction.  All  the 
checks  in  the  Bank  envelope  will  be  returned  to  you  and  kept  till  the  end 
of  the  month  unless  the  teacher  has  a  special  file  in  which  to  place  them. 

Present  all  your  books,  including  the  check  book,  to  your  teacher  for 
inspection.    When  the  books  of  entry  are  correct,  you  are  ready  to  post. 


JOBBING  FURNITURE  151 

Opening  Ledger  Accounts.  Accounts  should  be  opened  up  in  a 
systematic  order.  First,  the  accounts  that  show  assets  or  liabilities, 
chiefly,  will  be  opened  up,  then,  the  accounts  that  show  a  nominal  or 
profit  and  loss  element,  principally.  Open  the  accounts,  two  on  a  page, 
as  follows.     Leave  a  place  after  each  personal  account  for  the  address: 

ACCOUNT  PAGE 

D.  E.  Martin,  Capital 1 

H.  L.  Kline,  Capital 1 

Real  Estate 2 

Furniture  and  Fixtures 2 

Delivery  Equipment 3 

Notes  Receivable 3 

J.  C.  Reed 4 

C.  P.  Baker  &  Co : 4 

Chas.  Osgood 5 

D.  C.  Lanning 5 

B.  L.  Duncer 6 

C.  L.  Larson 6 

H:  E.  King 7 

D.  G.  Paxton 7 

J.  G.  Hull 8 

J.  A.  Reiss  &  Co 8 

A.  Dorris 9 

J.  C.  Jenkins 9 

K.  L.  Mears 10 

G.  L.  Bennett 10 

F.  I.  Barber 11 

C.  O.  D.  Account 11 

Leave  page  12  blank. 

D.  E.  Martin,  Personal 13 

H.  L.  Kline,  Personal 13 

Notes  Payable ,  . .  14 

Northwestern  Furniture  Co 14 

Simmons,  Gardner  &  Co 15 

Atlas  Parlor  Furniture  Co 15 

F.  Bishop  &  Co... 16 

Klingman  Furniture  Co 16 

E.  J.  Ranney  Co 17 

Price  Furniture  Co 17 

Leave  page  18  blank. 

Purchases 19 

Sales 19 

Merchandise  Trading 20 

Expense 20 

Freight  In 21 


152  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

ACCOUNT  PA6E 

Delivery  Expense 21 

Advertising 22 

Insurance 22 

Collection  and  Exchange 23 

Interest . 23 

Merchandise  Discount 24 

Profit  and  Loss 25 

New  accounts  will  be  opened  up  in  September. 

As  you  post,  put  the  address  of  each  customer  and  of  each  creditor 
after  the  name  in  the  ledger. 

Indexing.  The  first  two  pages  of  the  ledger  are  ruled  for  indexing. 
Write  or  print  each  letter  of  the  alphabet,  as  a  heading,  giving  equal  space 
to  each  letter  with  the  exception  of  X,  Y  and  Z,  which  are  put  together 
in  one  space. 

Personal  accounts  should  be  indexed,  under  the  proper  letters,  as 
follows: 

Ray,  C.  J 8 

Brown  &  Co.,  J.  1 9 

National  Furniture  Co 10 

City  Furniture  Co.,  The 12 

Impersonal  accounts  containing  two  or  more  words  should  be  indexed 
under  the  first,  as: 

Notes  Receivable • 5 

Collection  and  Exchange 18 

Posting.  Post  the  entries  for  each  day  but  do  not  post  any  totals 
from  the  books.  No  trial  balance  will  be  taken  till  the  end  of  the  month. 
Post  in  the  following  order: 

1.  Sales  Book 

2.  Purchase  Book 

3.  Cash  Book 

4.  Journal 

The  work  of  August  will  be  continued  in  Chapter  XX. 


CHAPTER  XIX 
HOW  TO  SHIP  GOODS 


In  the  wholesale  and  jobbing  trade,  most  goods  are  shipped  to  out  of 
town  customers  by  freight.  Whenever  goods  are  shipped  by  freight,  bills 
of  lading  are  made  out. 

Bills  of  Lading.  A  bill  of  lading  is  a  receipt  given  by  the  carrier  to 
the  shipper  acknowledging  the  receipt  of  the  goods  and  contracting  to  carry 
them. 

Each  firm  that  makes  a  business  of  making  shipments  by  freight  uses 
its  own  bills  of  lading  with  the  name  of  the  firm  printed  in.  These  are 
made  out  by  the  firm's  shipping  clerk  and  sent  to  the  freight  office  of  the 
railroad  company  or  other  carrier. 

Straight  Bills  of  Lading.  A  straight  bill  of  lading  is  the  one  used  for 
ordinary  shipments  to  customers.     It  consists  of  three  forms: 

1.  The  Original  Bill  of  Lading 

2.  The  Shipping  Order 

3.  The  Memorandum 

These  are  made  out  in  triplicate  by  the  use  of  carbon  paper. 

The  Interstate  Commerce  Commission  has  prescribed  uniform  bills 
of  lading  to  be  used  in  all  interstate  shipments. 

By  order  of  the  Commission,  the  following  things  must  be  observed 
in  reference  to  straight  bills  of  lading: 

1.  They  must  be  8 J  inches  wide,  but  may  be  of  any  length. 

2.  The  three  forms  must  be  printed  on  white  paper. 

3.  The  conditions  of  shipment  prescribed  by  the  Interstate  Commerce 
Commission  must  be  printed  on  the  back  of  each  of  these  forms. 

4.  The  three  forms  must  be  as  illustrated  here.  The  original  is  given 
in  full,  while  the  heading  only  of  the  shipping  order  and  of  the  memorandum 
is  given.  The  original  is  made  out  as  it  would  be  filled  in  by  the  shipper's 
shipping  clerk  before  sending  it  to  the  freight  office.  All  other  necessary 
items  are  filled  in  before  being  signed  by  the  agent  of  the  railroad 
company. 

Original  Straight  Bill  of  Lading.  The  original  straight  bill  of  lading, 
together  with  the  duplicates,  is  made  and  signed  by  the  shipper  per  the 

153 


154 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Original  Straight  Bill  of  Lading 

Uniform  Bill  of  Lading— Standard  Form  ol  Straight  Bill  of  Lading  approred  by  the  Interstate  Commerce  Co  mm  Isslon  by  Order  No.  787  of  luno  27,  1 908 

Chicago  &  North  Western  Railway  Company 

STRAIGHT  BILL  OF  LADING-  ORIGINAL-  NOT  Shipper's  No 

NEGOTIABLE  A         .,     -T 

Agent  s  No 


RECEIVED,  subject  to  the  classifications  and  tariffs  in  effect  on  the  date  of  issue  of  this  Original  Bill  of  Lading, 


jz*dkj>Ait!L  Fv?fh 


'^Y^^iy 


J91J=L 


the  property  described  below,  in  apparent  good  order,  except  as  noted, (contents  and  condi- 
tion of  contents  of  packages  unknown),  marked,  consigned,  destined  as  indicated  below,  which  said  Company  agrees  to  carry  to  its  usual  place  of 
delivery  at  said  destination,  if  on  its  road,  otherwise  to  deliver  to  another  carrier  on  the  route  to  said  destination.  It  is  mutually  agreed,  as  to  each 
carrier  of  all  or  any  of  said  property  over  all  or  any  portion  of  said  route  to  destination,  and  as  to  each  party  at  any  time  interested  in  ail  or  any  of 
said  property,  that  every  service  to  be  performed  hereunder  shall  be  subject  to  all  the  conditions,  whether  printed  or  written,  herein  contained 
(including  conditions  on  back  hereof)  and  which  are  agreed  to  by  the  shipper  and  accepted  for  himself  and  his  assigns. 


The  Bate  of  Freight  from. 


to 

s  in  Cents  per  1 00  Lbs. 

IF  Special 
Per ~ 

IF  Special 

IF... Timet  1st 

IF  1st  Class 

IF  2d  Clatt 

IF  Rule  25 

IF  3d  Class 

IF  Rale  26 

IF  Rale  28 

IF  4th  Class 

IF  6th  Class 

IF  6th  Class 

Per 

Consigned  to 
Destination 
Route 


(Mail  Address— Not  for  purposes  of  Delivery.) 


S2S2,     State  of        ^flfJ^L 


.County  of. 


Car  Initial 


.Car  No.. 


No. 
Packages 

DESCRIPTION  OF  ARTICLES 
AND  SPECIAL  MARKS 

Weight  (Subject  to 
Correction) 

Class  or 
Rate 

Check 
Column 

If  charges  are  to  be  pre- 
paid, write  or  stamp  here, 
"To  be  Prepaid." 

?-tt 

oC_J^/^>7^/^7^!-^r7  ^feh^?  ^-rz  ^<  ^4  ^>— 

3-o 

^Z^t^S^^r^ st^7s  / a^fr-r^s^Ls 

^UyAlr^^^^ 

/sf~ 

0  0 

to  apply  in  prepayment  of 
the  charges  on  the  property 
described  hereon. 

Agent  or  Cashier. 

fer 

(The  signature,  here  acknowl- 
edges only  the  amount  prepaid.) 

Charges  advanced: 

%  .    . 

Per. 


M2z£>£ 


-Shipper. 


.Agent. 


Per. 


{This  Bill  of  lading  is  to  be  aigned  by  the  Stripper  and  Agent  of  the  Carrier  issuing  same.) 


HOW  TO  SHIP  GOODS 


155 


Shipping  Order 

rcrase  In  connection  with  the  Standard  form  of  Straight  Bill  tl  lading  approved  by  the  Interstate  Commerce  Commission  by  Order  No.  787.  of  Jane  27, 1908 

Chicago  8c  North  Western  Railway  Company 

THIS  SHIPPING  ORDER  must  be  legibly  filled  In,  in  Ink,         Shipper's  No 

in  Indelible  Pencil,  or  in  Carbon,  and  retained  by  the  Agent.  Acent's  No 


RECEIVE,  subject  to  the  classifications  and  tariffs  in  effect  on  the  date  of  issue  oi  this  Shipping  Order, 


'T 


/(? ,  191. 


from J,  ^j  /<^—Jf7^f?>S^^/  V~~CjO(7^  the  property  described  below,  in  apparent  good  order,  except  as  noted  (contents  and  condi- 
tion of  contents  of  packages  unknown),  markeOT  consigned,  destined  as  indicated  below,  which  said  Company  agrees  to  carry  to  its  usual  place  of 
delivery  at  said  destination,  if  on  its  road,  otherwise  to  deliver  to  another  carrier  on  the  route  to  said  destination.  It  is  mutually  agreed,  as  to  each 
carrier  of  all  or  any  of  said  property  over  all  or  any  portion  of  said  route  to  destination,  and  as  to  each  party  at  any  time  interested  in  all  or  any  of 
said  property,  that  every  service  to  be  performed  hereunder  shall  be  subject  to  all  the  conditions,  whether  printed  or  written,  herein  contained 
(including  conditions  on  back  hereof)  and  which  are  agreed  to  by  the  shipper  and  accepted  for  himself  and  his  assigns. 

The  Rate,  of  Freight  from, . 


to 

s  in  Cents  per  100  Lbs. 

IF  Special 
Per 

IF  Special 

IF    Time*  lot 

IF  1st  Class 

IF  Cd  CIms 

IF  Rolo  26 

IF  3d  Class 

IF  Rule  26 

IF  Role  28 

IF  4th  Claso 

IF  6th  CUM 

IF  Gih  CltK 

Per 

Memorandum 

For  use  In  connection  with  the  Standard  form  of  Straight  Bill  of  Lading  approved  by  the  Interstate  Commerce  Commission  by  Order  No.  787,  of  June  27, 1908 

CHICAGO  8c  NORTH  WESTERN  RAILWAY  COMPANY 


THIS  MEMORANDUM  is  an  acknowledgment  that  a  bill  of 
lading  has  been  issued  and  is  not  the  Original  Bill  of  Lading,  nor 
a  copy  or  duplicate,  covering  the  property  named  herein,  and  is 
intended  solely  for  filing  or  record. 


Shipper's  No.. 
Agent's  No 


RECEIVED,  subject  to  the  classifications  and  tariffs  in  effect  on  the  date  of  the  receipt  by  the  carrier  of  the  property  described  in  the 


at. 


-C{^C2 


_ZZ2L 


.191: 


from I  ^S.  /y~i*^%*<&7tS ^SffS  Y  i.£)(7~'  Hba  property  described  below,  in  apparent  good  order,  except  as  noted  (contents  and  condi- 
tion of  contents  of  packages  unknown),  marked,  consigned,  destined  as  indicated  below,  which  said  Company  agrees  to  carry  to  its  usual  place  of 
delivery  at  said  destination,  if  on  its  road,  otherwise  to  deliver  to  another  carrier  on  the  route  to  said  destination.  It  is  mutually  agreed,  as  to  each 
carrier  of  all  or  any  of  said  property  over  all  or  any  portion  of  said  route  to  destination,  and  as  to  each  party  at  any  time  interested  in  all  or  any  of 
said  property,  that  every  service  to  be  performed  hereunder  shall  be  subject  to  all  the  conditions,  whether  printed  or  written,  herein  contained 
(including  conditions  on  back  hereof)  and  which  are  agreed  to  by  the  shipper  and  accepted  for  himself  and  his  assigns. 

The  Rate  of  Freight  from 


to 

s  in  Cents  per  100  Lbs. 

IF  Special 

IF  Special 

IF. .. Timet  Ut 

IF  1st  Clan 

IF  2d  Class 

IF  Rule  26 

IF  3d  Class 

IF  Rule  26 

IF  Rale  28 

IF  4th  Class 

IF  6th  Class 

IF  6th  Class 

Per 

shipping  clerk.  It  is  taken  with  the  duplicates  to  the  freight  office.  The 
rate,  the  classification,  and  the  weight  are  filled  in  by  the  freight  agent  and 
the  bill  of  lading  is  signed  by  the  freight  agent.  Oftentimes  these  items 
are  filled  in  by  the  shipping  clerk,  or  traffic  manager  of  the  shipper  and 
simply  checked  by  the  freight  agent,  or  some  of  them  may  be  left  blank. 

The  original  straight  bill  of  lading  is  given  to  the  shipper  and  by 
him  sent  to  the  consignee.  If  the  consignee  is  not  known,  he  must  pre- 
sent the  bill  of  lading  before  he  can  get  the  goods.     It  is  not  negotiable. 


156  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

The  Shipping  Order  is  signed  by  the  shipper  and  retained  by  the 
railroad  company. 

The  Memorandum  is  signed  by  both  the  shipper  and  by  the  agent  of 
the  transportation  company.  It  is  retained  by  the  shipper  for  reference 
should  any  claim  arise  in  reference  to  the  shipment. 

Sometimes  the  shipper  retains  the  original  bill  of  lading  and  sends 
the  memorandum  to  the  consignee.  This  is  not  usually  done  except  when 
the  shipper  guarantees  the  proper  delivery  of  the  shipment  at  its  destination. 
Ordinarily  when  the  goods  are  delivered  to  the  railroad  company  and  a 
straight  bill  of  lading  is  obtained,  the  shipper's  responsibility  ceases.  The 
transportation  company  becomes  the  agent  of  the  buyer  in  the  transpor- 
tation of  the  goods. 

Freight  C.  O.  D.  Shipments.  When  an  order  for  goods  is  received 
from  a  person  whose  financial  standing  is  not  known,  or  when  the  finan- 
cial responsibility  of  the  customer  is  questioned,  goods  are  usually  sent 
C  O.  D.,  or,  when  a  new  customer  whose  credit  standing  has  not  yet  been 
ascertained  wants  the  goods  at  once,  they  may  be  sent  C.  O.  D. 

The  object  of  any  C.  O.  D.  shipment  is  to  retain  the  title  to  the  goods, 
and  to  prevent  the  consignee  from  obtaining  the  goods  until  they  are  paid 
for. 

Order  Bill  of  Lading.  When  goods  are  sent  by  freight,  C.  O.  D., 
an  Order  Bill  of  Lading  must  be  made  out.  It  is  similar  to  the  straight 
bill  of  lading  in  size,  conditions  on  the  back,  description  of  the  articles, 
places  for  the  signatures,  etc.,  but  differs  in  the  heading. 

It  differs  from  the  straight  bill  of  lading,  in  several  respects. 

1.  It  is  "Consigned  to  order  of"  the  shipper  or  a  bank  as  agent  for 
him. 

2.  The  name  of  the  person  to  whom  the  goods  are  to  be  shipped 
is  written  after  "Notify." 

3.  The  order  bill  of  lading  is  negotiable. 

4.  The  original  must  be  printed  on  yellow  paper  and  the  duplicates 
on  blue  paper.     The  original  order  bill  is  illustrated  on  the  next  page. 

How  to  Ship  by  Freight,  C.  O.  D.     The  necessary  steps  are  as  follows: 

1.  The  invoice  is  made  out  in  the  usual  way,  with  the  exception  of 

the   terms,    which   are   "Order   of Bank".      This   invoice   is   sent 

direct  to  the  customer  by  mail. 

2.  An  Order  Bill  of  Lading  is  made  out  to  the  order  of  the  shipper's 
bank  or  of  the  shipper  himself. 

3.  A  sight  draft  is  drawn  on  the  customer  in  favor  of  the  shipper's 
bank  or  in  favor  of  himself  and  indorsed  to  the  bank. 

4.  The  sight  draft  attached  to  the  bill  of  lading  is  given  to  the  ship- 
per's bank  for  collection. 


HOW  TO  SHIP  GOODS 


157 


Original  Okder  Bill  of  Lading: 

Ijniiorm  Bill  of  lidlng—  Standard  Form  ol  Order  Bill  ol  Lading  approved  by  Hie  Interstate  Commerce  Co  mmlsslon  by  Order  No  787  of  June  27.  1 908 

Chicago  8c  North  Western  Railway  Company 

Shipper's  No 

order  bill  OF  LADING-ORIGINAL  Agent's  No 


RECEIVED,  subject  to  the  classifications  and  tariffs  in  effect  on  the  date  of  issue  of  this  Original  Bill  of  Lading 


^£id^=atddl^zJL^Z^^-  <4*4- 


;  *£zl+  i9i^z-y 


*lan-J*ltrf('lfirlTj7«tf7 ~<f^  ^P^f~^^L.(£?(?T.  '^  property  described  below,  in  apparent  good  order,  except  as  noted  (contents  and  condi- 
tion of  contents  of  packages  unknown),  marked,  consigned,  destined  as  indicated  below,  which  said  Company  agrees  to  carry  to  its  usual  place  of 
delivery  at  said  destination,  if  on  its  road,  otherwise  to  deliver  to  another  carrier  on  the  route  to  said  destination.  It  is  mutually  agreed,  as  to  each 
carrier  of  all  or  any  of  said  property  over  all  or  any  portion  of  said  route  to  destination,  and  as  to  each  party  at  any  time  interested  in  all  or  any  of 
said  property,  that  every  service  to  be  performed  hereunder  shall' be  subject  to  all  the  conditions,  whether  printed  or  written,  herein  contained 
(including  conditions  on  back  hereof)  and  which  are  agreed  to  by  the  shipper  and  accepted  for  himself  and  his  assigns. 

The  surrender  of  this  Original  ORDER  Bill  of  Lading  properly  endorsed  shall  be  required  before  the  delivery 
of  the  property.  Inspection  of  property  covered  by  this  bill  of  lading  will  not  be  permitted  unless  provided  by  law  or 
unless  permission  is  indorsed  on  this  original  bill  of  lading  or  given  in  writing  by  the  shipper. 

The  Rate  of  Freight  from 


to 

is  in   Cp.nt.s  ppr    lOO   T.hs. 

IF  Special 
Per  

IF  Special 

F... Time*  1st 

IF  IttClatt 

IF  2d  Clatt 

IF  Rule  25 

IF  3d  Class 

IF  Rule  26 

IF  Rule  28 

IF  4th  Clatt 

IF  5th  Clatt 

IF  6th  Clatt 

Per 

:  for  purposes  of  Delivery.) 


State  of      /y/y->f-<d^.     County  oL 


At     '^-y£^M/>r7^^7  j>y State  of     k~V^7^^/^.       County  of 

Route Tar  Initial . Car  No.. 


No. 

Packages 

DESCRIPTION    OF    ARTICLES 
AND    SPECIAL  MARKS 

Weight  (Subject  to 
Correction) 

Clatt  or 
Rate 

Check 
Column 

If  charges  are  to  be  pre- 
paid, write  or  stamp  here, 
"To  be  Prepaid." 

/^r 

^Chf^^f^f^^yf.^ 

r 

VC^??-^i^fr^>  ^4 — </ 

/  n 

~?/J»^jt7^?^  rS}s^LJ>^f^ 

Received  $ 

to  apply  in  prepayment  of 
the  charges  on  the  property 
described  hereon. 

Agent  or  Cashier. 

PfT 

(The  signature  here  acknowl- 
edges only  the  amount  prepaid.) 

Charges  advanced: 

$ 

-JK^U^ ■  ^-X^r^T^y^y  ~^k 


Per_ 


-Shipper. 


-Agent. 


Per_ 


I  of  Lading  i 


to  be  signed  by  the  Shipper  and  Agent  of  the  Carrier  issuing  same.) 


158 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


This  method  of  making  shipment  is  also  known  as  "shipper's  order" 
and  as  "draft,  with  bill  of  lading  attached." 

How  Collection  is  Made.  The  bank  sends  the  draft  with  bill  of 
lading  attached  to  a  bank  in  the  city  where  the  consignee  resides.  It  in- 
dorses both  the  order  bill  of  lading  and  the  draft  to  that  bank.  When  the 
draft,  with  bill  of  lading  attached,  reaches  the  correspondent  bank,  the 
bank  sends  a  notice  to  the  consignee  giving  details  of  the  draft  and  bill 
of  lading,  and  asking  him  to  pay  it.  He  pays  the  draft  and  receives 
the  receipted  draft  and  the  order  bill  of  lading  indorsed  to  him.  He  then 
takes  the  order  bill  of  lading  to  the  freight    office  and  receives  the  goods. 

The  correspondent  bank  usually  credits  the  home  bank  and  the  home 
bank  then  gives  the  shipper,  the  drawer  of  the  draft,  credit  for  the  amount 
of  the  draft,  less  collection  charges.  Sometimes  a  bank  draft  is  issued  by 
the  correspondent  bank  instead  of  sending  the  credit. 

Entries  for  Freight,  C.  O.  D.  One  account  is  kept  for  all  shipments 
by  freight,  C.  O.  D.  In  the  sales  book,  C.  O.  D.  Account  is  charged,  followed 
by  the  name  of  the  buyer. 


7r7J~ 


/(pJ^j^ 


This  is  posted  to  the  C.  0.  D.  Account  in  the  ledger  as  follows 


'9- 


M 


j~  feO^Cnj^jsAz*/ 


/<?. 


s7. 


When  the  credit  is  received  from  the  bank,  C.  O.  D.  Account,  with 


HOW  TO  SHIP  GOODS  159 

the  name  of  the  customer,  is  credited  on  the  cash  receipts.  It  is  posted 
to  the  credit  side  of  the  C.  0.  D.  Account  and  the  customer's  name  put 
in  the  explanatory  column. 

Express  C.  O.  D.  Shipments  of  goods  that  are  not  bulky  are 
often  made  by  express.  If  the  shipper  wants  to  be  sure  of  receiving 
his  money  before  the  goods  are  delivered,  he  may  send  them  by  express, 
C.  0.  D.  The  method  of  making  shipment  and  of  collecting  the  money 
differs  from  freight,  C.  O.  D.  principally  because  express  companies  will 
make  shipments  and  also  make  the  collection  for  the  shipper. 

The  steps  necessary  are  as  follows: 

1.  The  invoice  is  made  out,  receipted,  and  placed  in  a  C.  O.  D. 
envelope.  You  will  find  C.  O.  D.  envelopes  in  your  envelope  of  Business 
Forms.     Take  one  and  study  it. 

2.  The  articles  shipped  must  be  marked  with  the  letters  "C.  0.  D." 
and  with  the  amount  to  be  collected. 

3.  The  shipper  may  fill  out  the  C.  O.  D.  envelope  or  it  may  be  done 
by  the  agent  of  the  express  company.  On  the  back  of  the  envelope  fill  in 
the  following:  (1)  "Goods  Shipped  to",  with  the  address,  (2)  "Amount  of 
Bill"  and  (3)  "Snipper's  Instructions",  if  any.  Under  the  last  heading 
the  shipper  may  instruct  the  express  company  to  collect  the  charges  for 
the  return  of  the  money,  or  to  take  them  out  of  the  amount  collected. 
He  may  also  instruct  the  company  to  allow  the  consignee  to  examine  the 
goods  if  he  wishes.  It  is  understood  that  the  charges  for  the  return  of  the 
money  are  to  be  paid  by  the  consignee  unless  the  shipper  gives  different 
instructions. 

On  the  face  of  the  envelope  the  name  and  address  of  the  shipper  are 
written. 

4.  Collection  is  made  as  follows: 

The  express  envelope  is  sent  by  express  to  the  express  office  in  the  city 
where  the  consignee  resides.  Notice  is  given  the  consignee  by  mail  and 
he  calls  at  the  express  office,  pays  the  invoice  and  charges,  and  receives 
the  goods,  or,  the  collection  and  delivery  may  be  made  by  the  regular 
express  messenger  at  the  consignee's  place  of  business. 

5.  Remittance  is  made  as  follows: 

The  express  company  issues  an  express  check  on  its  main  office  payable 
to  the  order  of  the  shipper.  This  is  mailed  in  the  same  C.  O.  D.  envelope 
to  the  shipper  whose  address  is  already  on  the  face  of  the  envelope.  The 
proceeds  of  C.  O.  D.  shipments  must  be  remitted  to  the  shipper  within  24 
hours  after  collection  has  been  made. 

Sometimes  the  money  is  placed  in  the  C.  O.  D.  envelope  and  returned 
to  the  express  office  from  which  it  was  billed.    It  is  then  paid  to  the  shipper. 

Entry  for  Express  C.  O.  D.  The  entry  is  made  in  the  same  way  as 
for  a  freight  C.  O.  D.  sale  except  that  the  terms  are  different.  If  the  ship- 
ment is  given  to  the  American  Express  Co.,  the  terms  would  be  "American 


160  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Express  Co.  Collect."     It  is  posted  to  the  same  C.  O.  D.  Account  as  for 
freight  C.  O.  D.  and  the  buyer's  name  written  in  the  explanatory  column. 

Exercise  34.  Make  the  entries  on  journal  paper  for  the  following 
transactions,  using  the  same  trading  accounts  that  you  have  been  using 
in  Set  VI. 

January     1.     Paid  for  freight  on  purchases,  $97.80. 
3.     Paid  for  packing  boxes,  $13.85. 

5.  Chas.  Smith  returned  goods  worth  $25.80. 

6.  Darber   &    Co.    allowed     our   claim   for   an   overcharge 

on  goods  bought,  $36.80. 
8.     The  railroad  company  has    allowed  us  a  cash  rebate 

for  an  overcharge  on  our  freight  bill,  $11.50. 
10.     Paid    a    merchandise    broker    $36.50    commission    for 

buying  goods. 
15.     C.  Monton,  the  proprietor  takes  goods  at  cost,  valued 

at  $27.50,   for  personal  use. 
Credit  this  to  Purchases. 

18.     N.  Norris  is  allowed  a  claim  of  $18.15  for  damaged  goods. 
22.     Paid  for  packing  material,  $8.95. 

25.  Paid  freight  bill  on  purchases,  $37.85. 

26.  B.  L.  Barrow    &   Co.    allowed    our   claim  for  damaged 

goods,  $31.45. 
31.     Paid  shipping  clerk's  wages,  $45. 

31.     The  purchases  for  the  month  amounted  to  $8764.45. 
Credit  Accounts  Payable  to  represent  the  sum  of  all    the  creditors' 
accounts. 

31.     The  sales  for  the  month  amounted  to  $7954.60. 
Debit  Accounts  Receivable  to  represent  the  sum  of  all  the  customers* 
accounts. 

Exercise  35.  On  ledger  paper,  open  the  trading  accounts  and  post 
the  entries  of  the  last  exercise.  Explanations  should  be  written  in  the 
ledger  accounts. 

Use  $2386.40  as  the  inventory  of  merchandise. 

Close  the  trading  accounts  in  the  ledger.  Transfer  all  red  ink  amounts 
to  the  proper  place. 


CHAPTER  XX 
JOBBING  FURNITURE 

SET  VI 

Transactions  for  August  17-31 

Continue  all  the  books  of  entry  in  the  same  manner  as  for  the  first  part 
of  the  month.  Leave  no  space  between  the  entries  for  August  15  and 
August  17. 

August  17.  Receive  this  invoice  of  the  E.  J.  Ranney  Co.  A  draft 
accompanies  it. 

Make  the  entry  for  the  invoice  in  the  usual  way.  Record  it  as  paid 
by  15-day  draft.  Accept  the  draft,  and  make  the  entry  and  record  for  it. 
Return  the  draft  to  the  E.  J.  Ranney  Co.  by  putting  it  in  the  Outgoing 
Papers  envelope. 

Receive  this  check  from  D.  C.  Lanning,  on  account. 

J.  C.  Jenkins,  Dayton,  Ohio,  orders: 
6  Brass  Bedsteads 
5  B.  E.  Maple  Dressers 
8  Hair  Mattresses 
15  Felt  Mattresses 

Terms:     on  account,  30  days. 

Since  this  is  a  sale  to  an  out-of-town  customer,  the  goods  will  be  shipped 
by  freight.  Make  out  a  straight  bill  of  lading  in  triplicate,  detach  and  take 
the  three  copies  to  the  freight  office  or  to  your  teacher.  You  should  sign  in 
the  name  of  the  firm  by  your  name. 

The  original  bill  of  lading  and  the  memorandum  will  be  signed  by  the 
teacher  for  the  railroad  company  or  by  some  student  designated  by  the 
teacher,  and  returned  to  you.  The  shipping  order  will  be  kept  by  the 
agent  for  the  railroad  company.  Send  the  original  bill  of  lading  with  the 
invoice  to  the  customer.  File  the  memorandum  in  the  Miscellaneous  file. 
You  will  follow  the  same  method  for  each  shipment  to  an  out-of-town 
customer  unless  different  instructions  are  given. 

Receive  this  invoice  of  goods  from  the  Price  Furniture  Co.  Notice 
the  terms.  Make  out  the  note  according  to  the  terms  and  make  the  entry 
and  record  for  it. 

Do  not  forget  that  an  entry  is  a  formal  statement  of  the  account    or 

161 


162  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

accounts  affected  by  a  transaction.  A  record  is  something  that  gives 
additional  information  about  details  that  can  be  omitted  from  the  books 
of  entry. 

August  18.     K.  L.  Mears,  Syracuse,  N.  Y.,  orders: 
6  Mahogany  Chiffoniers 
10  Mahogany  Dressing  Tables 
5  Mahogany  Music  Cabinets 
18  Mahogany  Parlor  Tables 

Terms:     sight  draft  for  $300;  balance  on  account. 

Make  out  the  invoice  and  the  bill  of  lading  in  the  usual  way.  Draw 
the  sight  draft  on  him  in  favor  of  National  Exchange  Bank  and  leave  it 
at  the  bank  for  collection.     No  indorsement  is  necessary. 

Banks  have  different  methods  of  receipting  for  the  commercial  paper 
which  is  left  by  customers  at  the  bank  for  collection.  One  method  is  to 
record  all  paper  left  for  collection  in  the  back  part  of  the  pass  book,  on  a 
special  page.  That  plan  will  be  followed  in  your  business  practice  work. 
Take  the  draft  with  your  pass  book  to  the  bank  and  have  it  recorded  on 
the  last  page  of  the  pass  book. 

Other  banks  have  printed  forms  on  which  they  write  the  details  of  the 
paper  received  and  give  to  the  customer  as  a  receipt. 

Your  bank  will  send  this  draft  either  direct  or  through  a  large  bank 
in  New  York  City  to  a  bank  in  Syracuse.  The  Syracuse  bank  will  notify 
K.  L.  Mears  either  by  mail  or  by  telephone  and  he  will  make  payment. 
The  Syracuse  bank  then  sends  back  the  credit  and  as  soon  as  it  is  received 
by  the  National  Exchange  Bank,  you  will  be  given  credit  in  your  bank 
account. 

C.  P.  Baker  &  Co.,  City,  order: 
18  Oak  Dining  Chairs 
24  Oak  Library  Tables 

Terms:    cash,  less  2%. 

The  check  is  received  with  the  order. 

For  what  amount  should  the  sale  be  entered  in  the  sales  book? 
Should  the  discount  be  deducted  on  the  invoice? 
Should  the  discount  be  entered  in  the  cash  book?    Why? 
Refer  to  a  similar  transaction  on  the  10th. 

G.  L.  Bennett,  Lansing,  Mich.,  orders: 

5  C.  Walnut  Bedsteads 

6  C.  Walnut  Chamber  Sets 
6  Oak  Davenports 

Terms:    note  at  30  days  for  $500;  balance,  on  account. 
Make  the  entry  for  the  sale  in  the  usual  way.    The  note  will  be  received 
later. 

Receive  an  invoice  of  goods  from  Simmons,  Gardner  &  Co. 

Enter  the  invoice  in  the  usual  way  for  the  amount  of  the  invoice,  with- 


JOBBING  FURNITURE  163 

out  deducting  the  discount.  The  draft  will  be  presented  through  the  bank 
later. 

Deposit  all  checks  on  hand. 

August  21.  Receive  this  check  from  J.  A.  Reiss  &  Co.,  for  invoice  of 
the  11th,  less  discount. 

K.  L.  Mears  reports  that  one  Mahogany  Chiffonier  was  broken  in 
transit.     He  is  returning  it  and  asks  you  to  give  him  credit  for  it. 

Make  out  a  credit  memorandum  for  one  Mahogany  Chiffonier. 

What  was  the  debit  and  credit  effect  when  the  sale  was  made? 

What  effect  should  the  entry  for  an  allowance  on  a  sale  have  on  the  same  accounts?  Make  the  entry 
in  the  journal.    Explain  the  transaction  in  full. 

Receive  this  note  of  G.  L.  Bennett,  on  account. 

In  what  file  should  the  note  be  placed? 

F.  I.  Barber,  Scranton,  Pa.,  orders: 
8  Morris  Chairs 
12  Oak  Desk  Chairs 
6  Hair  Mattresses 
6  Oak  Sideboards 
Terms:     on  account. 
A.  Dorris,  City,  orders: 

12  Brass  Bedsteads 

6  B.  E.  Maple  Dressers 
10  Mahogany  Lady's  Desks 
Terms:     on  account. 

August  22.  The  bank  reports  the  sight  draft  on  K.  L.  Mears  collected. 
The  bank  made  no  charge  for  collecting  the  draft.  Take  your  pass  book 
to  the  bank  and  have  the  amount  of  this  collection  placed  to  your  credit. 
You  must  make  the  entry  the  same  as  if  you  had  received  the  money  direct 
from  K.  L.  Mears.  Explain  the  collection  on  the  left  check  stub  and  add 
the  amount  to  the  balance  on  the  right  check  stub. 

Mr.  Martin  has  arranged  with  the  National  Exchange  Bank  to  discount 
G.  L.  Bennett's  note  for  $500  at  the  bank.  Take  the  note  from  your  Notes 
Receivable  file  and  compute  the  discount  for  the  unexpired  time  at  6  %. 

Make  out  a  deposit  ticket  with  the  usual  heading.  Under  "  Checks" 
record  like  the  following: 

D.  E.  Hard's  note  disc.    $500.00 
Disc,  for  15  days  1.25 

Proceeds  $498.75 

Indorse  the  note  by  a  special  indorsement  and  take  it  to  the  bank  with 
the  deposit  ticket  and  your  pass  book. 

Make  a  full  explanation  of  the  transaction  on  the  left  check  stub  like 
the  details  on  the  deposit  ticket,  and  add  the  proceeds  to  the  balance  in 
your  check  book. 

Make  the  entries  on  the  theory  that  you  have  received  the  face  value 
of  the  note  from  the  bank  and  have  paid  the  bank  the  amount  of  the  discount. 


164  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Study  entries  of  the  same  kind  in  Chapter  X  before  making  the  entries  in 
the  books. 

In  the  bill  book  you  must  record  the  note  as  discounted  with  the  date 
and  the  amount  of  the  discount. 

As  A.  Dorris'  note  will  be  due  tomorrow,  leave  it  at  the  bank  for 
collection. 

Indorse  the  note  properly  and  take  it  to  the  bank  with  your  pass  book. 
Make  a  record  of  it  in  the  bill  book. 

Pay  Bishop  &  Co.,  on  account,  $500. 

Prove  cash  and  submit  the  proof  with  your  cash  book  and  check 
book  to  your  teacher  for  examination. 

August  24.  The  bank  presents  the  sight  draft  drawn  by  Simmons, 
Gardner  &  Co.,  for  the  amount  of  the  invoice  of  the  20th,  less  discount. 

Pay  it  by  check  in  favor  of  the  bank.  Make  the  entry  the  same  as 
if  you  had  paid  the  invoice,  less  discount,  by  check. 

Receive  this  check  from  J.  C.  Jenkins,  on  account. 

The  bank  reports  that  A.  Dorris'  note  has  been  collected  and  placed 
to  your  credit.  Make  out  a  deposit  ticket  for  the  amount  of  the  note  and 
interest  and  have  it  entered  in  your  pass  book. 

What  entry  should  be  made  for  the  face  of  the  note?  For  the  interest?  Have  you  made  the  records 
in  the  bill  book  and  in  the  check  book? 

J.  C.  Reed,  City,  orders: 

24  Oak  Dining  Chairs 

10  Kitchen  Cabinets 
8  Oak  Library  Tables 
Terms:     2/10,  net  30  days. 
K.  L.  Mears,  Syracuse,  N.  Y.,  orders: 

.  6  Mahogany  Parlor  Suites 

12  Mahogany  Rockers 
3  Turkish  Rockers 
Terms:     on  account. 

Are  you  making  out  a  bill  of  lading  for  each  out-of-town  sale? 

August  25.     Receive  this  invoice  from  the  Northwestern  Furniture  Co. 

D.  L.  Green,  Peoria,  111.,  has  given  us  information  on  which  to  give 
him  credit.  This  information  is  in  the  hands  of  Mr.  Martin,  but  investi- 
gation is  not  yet  complete.  Mr.  Green  has  asked  us  to  ship  the  following 
order  by  freight  C.  O.  D.,  as  he  desires  the  goods  at  once: 

5  Oak  Sideboards  at  $25.30 

6  Morris  Chairs  at  $22.60 

2  C.  Walnut  Chamber  Sets  at  $125 
Terms:     order  of  National  Exchange  Bank. 

Study  carefully  the  explanation  in  Chapter  XIX  for  this  kind  of 
shipments. 

Make  out  an  order  bill  of  lading  in  triplicate.     Draw  a  sight  draft, 


JOBBING  FURNITURE  165 

attach  it  to  the  original  order  bill  of  lading,  and  leave  it  at  the  bank  for 
collection.  The  amount  of  the  draft  will  be  entered  on  the  last  page  of 
your  pass  book. 

What  account  is  debited  for  this  sale? 

What  is  the  object  of  an  order  bill  of  lading?    Is  it  negotiable?    How  will  your  bank  make  collection? 

What  would  happen  if  Mr.  Green  should  refuse  to  pay  the  draft? 

August  26.     Pay  this  bill  of  the  Auto  Supply  Co. 

What  kind  of  a  charge  is  this?  Does  it  affect  a  real  or  a  nominal  account?  Does  it  increase  the  value 
of  the  delivery  equipment  or  simply  maintain  it?  Do  not  charge  this  to  the  Equipment  account,  but  open 
an  account  for  Delivery  Expense. 

Delivery  Expense.  This  account  will  be  debited  for  the  cost  of  all 
auto  supplies  necessary  for  the  business  and  for  all  repairs  and  renewals. 
It  should  also  be  debited  with  the  cost  of  the  deliveryman's  services. 

Delivery  Expense  should  be  credited  when  any  supplies  that  have  been 
charged  to  Delivery  Expense  are  sold  and  when  the  delivery  equipment 
earns  anything  for  the  business. 

Receive  this  N.  Y.  draft  from  K.  L.  Mears  on  account. 

August  27.  Write  a  check  in  favor  of  Cash  for  $3  and  buy  postage 
stamps.     Do  not  forget  to  check  the  entry. 

Mr.  Martin  informs  you  that  Simmons,  Gardner  &  Co.  have  notified 
the  firm  that  a  note  in  their  favor  with  interest,  is  due  today.  Consult 
your  bill  book,  compute  the  interest,  and  send  a  N.  Y.  draft  in  payment. 
Buy  the  N.  Y.  draft  by  check.  Include  exchange  25^.  The  note  will  be  re- 
ceipted by  your  teacher  for  Simmons, Gardner  &  Co.  and  returned  to  you  later. 

Study  this  transaction  carefully  to  see  what  accounts  should  be  debited  and  what  record  should  be 
made. 

Receive  this  check  from  F.  I.  Barber  to  apply  on  account. 
Deposit  the  checks  and  N.  Y.  draft  on  hand.     The  bank  charges  tV  % 
collection  on  all  out-of-town  checks. 

Have  you  entered  the  details  of  the  deposit  in  the  check  book? 
Why  doesn't  the  bank  charge  collection  on  N.  Y.  drafts? 

F.  I.  Barber,  Scranton,  Pa.,  orders: 

18  Oak  Dining  Chairs 

12  Oak  Library  Tables 
Terms:     2/10,  net  30  days. 
Receive  this  invoice  from  Bishop  &  Co. 

August  28.  The  bank  reports  the  draft  with  bill  of  lading  attached, 
on  D.  L.  Green,  collected.  Collection  charge  75^.  Make  out  the  usual 
deposit  ticket  and  deduct  the  collection  charge.  Have  it  entered  in  your 
pass  book. 

What  account  was  debited  when  the  sale  was  made?  What  account  must  now  be  credited  for  the 
same  amount? 

Mr.  Martin  informs  you  that  the  firm  has  agreed  with  the  owner  of 
the  building  to  purchase  the  store  building  and  lot  from  him.     In  order 


166  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

to  provide  the  necessary  funds,  Mr.  Martin  has  arranged  with  the  bank 
to  discount  the  firm's  note,  payable  60  days  after  date,  for  $5000. 

Make  the  note  payable  to  the  bank.  The  bank  has  asked  each  partner 
to  indorse  the  note  as  a  further  guaranty  of  its  payment.  Your  teacher 
will  indorse  it  for  each  of  the  partners. 

Make  out  the  deposit  ticket,  deduct  the  discount  at  5%  and  find  the 
proceeds. 

Before  taking  the  note  to  the  bank  you  should  make  the  proper  record 
in  the  bill  book  for  the  note  issued  and  discounted. 

Take  the  deposit  ticket  and  note  to  the  bank  and  receive  credit  for 
the  proceeds. 

Make  two  entries  for  this  transaction. 

What  account  yields  the  value?    What  account  costs  the  business  value? 
Have  you  entered  the  details  of  this  transaction  on  the  left  check  stub? 

August  29.  The  firm  has  bought  the  building  and  lot  located  at  435 
State  St.  for  cash,  $9275.  As  an  evidence  of  the  transfer  of  the  property, 
the  firm  would  receive  a  deed  and  the  title  to  the  property  would  be  trans- 
ferred on  the  books  of  the  register  of  deeds  or  other  officer  to  whom  this 
duty  is  assigned.  The  deed  is  technical  in  form  and  meaning  and  will  not 
be  shown  here. 

The  basement,  first  floor,  and  part  of  the  second  floor  will  be  used  by 
the  firm.  The  rest  of  the  second  floor  is  leased  to  John  Theiler  at  a  monthly 
rent  of  $30. 

Make  a  memorandum  in  the  journal  of  the  purchase,  and  of  the  lease 
to  John  Theiler.  Pay  the  owner  of  the  building,  J.  A.  Winton,  $9275. 
Debit  the  Real  Estate  account  for  this  payment. 

Real  Estate  Account.  This  is  an  asset  account.  It  should  be  debited 
for  the  cost  of  land  and  buildings  and  for  anything  else  that  is  an  additional 
cost.  An  addition  to  the  building  would  be  an  added  cost.  The  difference 
between  the  value  of  a  board  walk  and  of  a  cement  walk  that  replaces  it 
is  an  added  cost.  Any  expenditures  for  alterations  when  the  building 
is  purchased  to  be  used  by  the  business  is  an  added  cost. 

It  must  not  be  debited  for  any  repairs  or  renewals  or  for  any  other  pay- 
ments to  keep  up  the  property.  It  must  not  be  credited  for  any  income  re- 
ceived from  the  property.  No  nominal  element  should  enter  into  this 
account  except  a  proper  depreciation  on  the  property  on  account  of  use. 

Real  Estate  Expense  and  Income.  This  account  should  include  all 
nominal  elements  that  have  anything  to  do  with  real  estate.  It  is  debited 
for  all  expenses  of  keeping  up  the  property  such  as  repairs,  renewals,  taxes, 
and  insurance.  It  is  also  debited  for  any  loss  on  the  sale  of  the  real  estate. 
It  is  credited  for  all  income  received  from  the  property  in  the  form  of  rent 
or  otherwise.    It  is  also  credited  for  any  profit  on  the  sale  of  the  real  estate. 

Real  Estate  Expense  and  Income  is  a  nominal  account  and  shows  a 
profit  or  a  loss.  In  the  ordinary  mercantile  business  it  usually  shows  a 
loss. 


JOBBING  FURNITURE  167 

August  31.     Pay  this  freight  bill  by  check  to  the  railroad  company. 
Returned  two  Oak  Davenports  to  F.  Bishop  &  Co.  and  received  this 
credit  memorandum. 

What  entry  was  made  when  the  goods  were  purchased?  Your  entry  now  must  be  the  reverse.  Ex- 
plain the  entry  fully. 

Each  partner  withdraws  $50  for  personal  use.     Give  them  checks. 

Pay  each  employee  by  check  as  follows: 

Student,  $50 

Chas.  Lannon,  $45 

Charge  the  salary  of  the  deliveryman  to  Delivery  Expense. 

Since  statements  are  to  be  made  and  the  books  closed,  it  will  be  neces- 
sary to  transfer  from  Delivery  Expense  to  Purchases  the  value  of  the  services 
of  the  driver  and  the  use  of  the  delivery  equipment  for  hauling  incoming 
goods  to  the  store  room.  Mr.  Kline  estimates  that  to  be  $15.75.  Make 
an  entry  debiting  Purchases  and  crediting  Delivery  Expense  for  $15.75. 
Explain  the  entry  fully. 

Second  Report.  Prove  cash  and  make  a  report.  Hand  in  your  report 
together  with  your  Outgoing  Papers  envelope  and  your  Bank  envelope. 
Submit  all  your  books  of  entry  and  your  check  book  to  your  teacher  for 
examination. 

CLOSING   WOKK 

Closing  Books  of  Entry.  Study  the  model  books  of  entry  before 
closing. 

Sales  Book.  Rule  each  page  of  the  sales  book  and  forward  to  the 
top  of  the  next  page.  Close  the  sales  book  at  the  end  of  the  month  by 
ruling  it  up  and  writing  in  the  account  to  be  credited  for  the  total. 

Purchase  Book.  Rule  the  purchase  book  and  write  in  the  account  to 
be  debited  for  the  total. 

Cash  Book.  Balance  the  cash  book  according  to  the  form  given  in  the 
Model  Cash  Book.      (Pages  136  and  137) 

Journal.  No  ruling  is  necessary,  but  each  column  of  the  journal  may 
be  added  to  see  that  they  are  equal. 

Posting.  1.  Post  the  sales  book.  Do  not  forget  the  pages  to  show 
the  posting  of  the  daily  sales  and  of  the  total.  Remember  that  we  no  longer 
keep  a  Merchandise  account.  To  what  account  should  the  total  be 
credited? 

2.  Post  the  purchase  book.  Do  not  forget  the  proper  posting  of  the 
total  and  the  paging. 

3.  Post  the  cash  book.  The  daily  entries^  will  be  posted  as  here- 
tofore.    Study  the  posting  of  the  totals. 

To  which  side  of  the  Merchandise  Discount  account  should  the  total  of  the  Merchandise  Discount 
column  on  the  Cash  Receipts  be  posted?    Why? 

To  which  side  should  the  total  of  the  Merchandise  Discount  column  on  the  Cash  Payments  be  posted? 
Why? 


168 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


How  should  the  total  of  the  Expense  column  be  posted?  Do  not 
post  the  total  cash  received  nor  the  total  cash  paid  out  to  the  ledger.  No 
Cash  account  will  be  kept  in  the  ledger  in  this  set  but  the  cash  balance  for 
the  trial  balance  will  be  taken  from  the  cash  book. 

4.     Post  the  journal  in  the  usual  way. 

Statements  of  Account.  A  statement  of  account  is  a  statement  to  a 
customer  of  his  dealings  with  the  business.  It  is  usually  sent  to  all  customers 
that  owe  the  business.     It  is  sent  out  monthly  and  is  generally  dated  the 


Statement  of  Account 


M  ^>S. 


Milwaukee,  Wis.,     67^/.^,  ^/   ifl 


:  N     ACCOUNT     WITH 


C.  N.  Bell  8c  Company 


f- 


<^L 


U^ez 


£l 


A£ 


12, 


Balance  per  statement 


YfiW^s, 


/W^/  ~~ff?^~A^?^ 


&aLd.^s*d*e2L2dAaa*&^ 


^). 


/Zr?^^  rt^/-  /  (O^rfC^?^ 


3/7 


/  /  2 


A 


^ 


2.-TV? 


JUL 


2^1 


^z 


2^,   &££ 


SA 


2-2-n 


£J 


J±£ 


JOBBING  FURNITURE  169 

last  day  of  the  month.  The  object  of  the  statement  is  to  enable  the  cus- 
tomer to  compare  his  account  with  the  statement  and  to  make  any  cor- 
rections necessary.  It  is  not  necessarily  a  dun  for  the  money,  but  where 
the  terms  of  payment  show  that  the  purchase  is  due  it  acts  as  a  reminder 
to  the  customer. 

In  the  wholesale  and  jobbing  trade,  itemized  invoices  are  rendered  for 
each  sale  made.  The  statement  of  account  does  not  show  the  items  sold 
but  is  simply  a  statement  of  the  invoices  rendered  and  of  the  credits  on 
account. 

In  the  retail  trade,  it  is  customary  to  send  an  itemized  statement  of 
account,  showing  all  the  items  of  merchandise  sold  and  the  credits  on 
account. 

In  the  statement  of  account  illustrated  there  is  a  balance  from  the 
previous  month,  which  is  the  first  item  of  the  debit.  In  rendering  state- 
ments to  customers  for  August,  you  will  have  no  balance  August  1. 

Render  statements  of  account  to  all  customers  that  owe  you.  Use 
your  ledger  accounts  and  refer  back  to  the  book  of  original  entry  whenever 
necessary. 

To  Prove  the  Bill  Book.  To  prove  the  Notes  Receivable  book,  list 
the  unpaid  notes  by  number  and  amount.  The  sum  of  these  unpaid  notes 
should  equal  the  balance  of  the  Notes  Receivable  account  in  the  ledger. 
If  it  does  not  prove,  check  the  notes  entered  with  the  debit  side  of  the 
ledger  and  those  paid  with  the  credit  side.  Prove  the  Notes  Payable  book 
on  the  same  principle. 

Trial  Balance.  Take  a  Trial  Balance.  Do  not  forget  that  the  cash 
book  is  the  cash  account. 

Inventories,  August  31,  19 — 
Merchandise: 

15  Brass  Bedsteads 

21  B.  E.  Maple  Dressers 
48  Felt  Mattresses 

31  Hair  Mattresses 

22  Kitchen  Cabinets 

26  Mahogany  Chiffoniers 

19  Mahogany  Dressers 

20  Mahogany  Dressing  Tables 
5  Mahogany  Lady's  Desks 

5  Mahogany  Music  Cabinets 
7  Mahogany  Parlor  Suites 
.  29  Mahogany  Parlor  Tables 


170  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

12  Mahogany  Rockers 

19  Oak  Chamber  Sets 

20  Oak  Davenports 
24  Oak  Desk  Chairs 
36  Oak  Dining  Chairs 
27  Oak  Library  Tables 

4  Oak  Sideboards 

6  Morris  Chairs 

3  Turkish  Rockers  at  $21.80.      None  bought  in  August. 

3  C.  Walnut  Bedsteads 

2  C.  Walnut  Chamber  Sets 
Freight  In  on  goods  unsold,  $113.50 

Real  Estate,  at  cost 
Expense,  8  tons  coal  at  $5.15 
Delivery  Equipment: 

Cost  $1375.00 

Depreciation  2  %  27  .  50 

Inventory  $1347.50 

Furniture  and  Fixtures: 

Cost  •       $411.25 

Depreciation: 

2%  on  $374.75         $7.50 

l%on      36.50  .37       $7.87 

Inventory  $403 .  38 

Insurance,  unexpired  63 .  20 

Copy  these  inventories  in  your  blank  books  after  the  merchandise 
inventory  has  been  corrected. 

Trading  and  Profit  and  Loss  Statements.  The  statements  to  be 
made  out  in  this  set  are  more  detailed  and  contain  a  much  greater  number 
of  accounts  than  those  of  previous  sets.  Since  the  object  of  these  state- 
ments is  to  give  information  to  the  proprietors  of  the  business,  they  should 
be  in  a  systematic  form  that  can  readily  be  understood. 

The  statements  will  be  made  out  in  two  sections:  the  Trading  and  the 
Profit  and  Loss  sections.  The  Trading  section  includes  that  part  of  the 
statement  that  has  to  do  with  the  cost  of  the  goods  sold  and  the  returns 
from  sales.  The  Profit  and  Loss  section  includes  all  other  profits  and  losses 
of  the  business.  The  selling  expenses  are  separately  shown  in  this  section. 
The  statements  here  illustrated  show  the  statements  of  a  business 
that  has  continued  from  a  previous  month.  Study  this  form  carefully. 
In  making  out  statements  for  August,  you  will  enter  the  value  of  the 
goods  invested  by  Mr.  Martin  in  place  of  the  inventory  of  Novenlber  1, 
19 — ,  shown  in  the  statement. 


JOBBING  FURNITURE 


171 


Trading  and  Profit  and  Loss  Statements  for  the'  month  ending  Nov.  30,  19 — 


8725 
136 


5317 


7232 


$107.80 
75.40 


$340.70 
26.30 


$167.45 
58.20 


12549 
5032 


7516 
93 


978 


32 


46 
35 

314 

7 
8 


109 
35 

21 
13 

7 


206 
206 


50 
75 


15 


25 


40 
95 


45 
60 


70 


40 


Returns : 

Gross  Sales 

Less  Returns  and  Allowances 
Net  Sales 

Costs : 

Inventory,  November  1,  19 — 
Purchases                                    $7328.45 
Less  Returns  and  Allowances     96.20 

Net  Purchases 

Less  Inventory,  Nov.  30,  19 — 

Prime  cost  of  goods  sold 

Freight  In 

Total  cost  of  goods  sold 
Gross  trading  profit  down 

Profits : 

Gross  trading  profit  brought  down 
Mdse.  Discount  Allowed: 

To  us 

By  us 

Profit 

Total  profit 

Losses : 

Selling  Expenses: 

Delivery  Expense 

Advertising 
General  Expense  Dr. 
Less  Inventory 

Collection  and  Exchange 

Interest 

Insurance  Dr. 

Insurance  unexpired 

Insurance  used 

Real  Estate  Expense  and  Income 

Depreciation: 

Of  Real  Estate 

Of  Delivery  Equipment 

Of  Furniture  and  Fixtures 
Total  losses 

Firm's  Net  Profit 

C.  Hass'  Net  Profit 
B.  E.  Hall's  Net  Profit 
Firm's  Net  Profit 


Make  Trading  and  Profit  and  Loss  statements  for  August. 


80 


40 
75 
50 


25 
15 

50 

25 
10 


20 
20 


8588 


7610 


978 


1011 


75 


05 


70 


10 


598 


412 


412 


70 


40 


40 


172 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 
Statement  of  Assets  and  Liabilities,  Nov.  30,  19- 


% 

Assets : 
Real  Estate  Cost             $10500.00 
Less  depreciation                      21.50 

10478 

305 

963 

5032 

58 

26 

1075 

5732 

3458 

50 
40 

95 
20 
30 
60 
25 

20 

27130 

6878 

Furniture  &  Fixtures  cost     $312.50 
Less  depreciation                        7.10 

• 

Delivery  Equipment  cost  $976.25 
Less  depreciation                     13.25 

Mdse.  Inventory 
Insurance,  unexpired 
Expense  Inventory 
Notes  Receivable 
Accounts  Receivable: 

J.  Carter                          $1378.90 

C.  Stafford                         1589.25 

D.  Winton  &  Co.               846.50 
J.  Campbell                      1917.60 

Cash 

Total  assets 

Liabilities : 

Notes  Payable 

Accounts  Payable: 

Clemens  &  Co.                $1768.00 
D.  Prentice                        2146.00 
J.  Hardy                              464.00 

2500 
4378 

— 

40 

Total  liabilities 
Firm's  net  worth 

Proof: • 
C.  Hass'  investment 
C.  Hass'  net  profit 

Less  C.  Haas,  personal 

C.  Hass'  net  worth 
B.  E.  Hall's  investment 
B.  E.  Hall's  net  profit 

Less  B.  E.  fiall,  personal 

B.  E.  Hall's  net  worth 
Firm's  net  worth 

— 

20252 

40 

10000 
206 

20 

10121 
10131 

10206 

85 

20 

10000 
206 

20 

20 

10206 
75 

20 

20 

20252 

40 

JOBBING  FURNITURE  173 

Statements  of  Assets  and  Liabilities.  The  form  of  the  statement 
of  Assets  and  Liabilities  for  this  set  differs  little  from  the  statement  in 
previous  sets.  The  principal  difference  is  that  in  those  assets  that  show 
a  depreciation,  the  cost,  the  depreciation,  and  the  present  value  must  be 
shown. 

The  arrangement  of  the  assets  should  be  according  to  a  definite  order. 
The  arrangement  given  on  page  172  begins  with  the  most  permanent  assets 
and  ends  with  cash. 

Make  a  statement  of  Assets  and  Liabilities  for  August  31. 

Test  the  correctness  of  the  statements  by  finding  the  Net  Worth  of 
each  partner.  The  sum  of  the  net  worths  of  D.  E.  Martin  and  H.  L.  Kline 
should  equal  the  firm's  net  worth  on  the  statement  of  Assets  and  Liabilities. 

Closing  the  Ledger.  Close  all  accounts  that  have  a  nominal  or  Profit 
and  Loss  element  in  them.  All  of  these  accounts  are  found  in  the  Trading 
and  Profit  and  Loss  statements.  Use  your  statements  as  guides  in  closing 
the  ledger.    Study  Chapter  XVI  again  before  beginning  to  close. 

1.  Close  the  trading  accounts  as  follows: 
•a)  Freight  In 

b)  Purchases 

c)  Sales 

d)  Merchandise  Trading 

2.  Close  all  the  accounts  in  the  Profit  and  Loss  statement  in  the 
order  that  they  occur  in  the  statement. 

To  close  accounts  that  show  a  depreciation: 

a)  Enter  the  inventory  in  red  ink  on  the  credit  side. 

b)  The  difference  between  the  debit  and  credit  sides  is  the  depre- 
ciation or  loss. 

c)  Enter  Profit  and  Loss  in  red  ink  on  the  credit  side  and  the 
amount  of  the  difference. 

d)  Rule  the  account. 

e)  Bring  the  inventory  down  on  the  debit  side  in  black  ink, 
dating  it  the  first  day  of  the  next  month. 

f)  Carry  the  Profit  and  Loss  item  to  the  debit  side  of  the  Profit 
and  Loss  account,  writing  in  the  name  of  the  account  from  which  it  was 
transferred. 

3.  Close  the  Profit  and  Loss  account  by  entering  the  amount  of  each 
partner's  profit  in  red  ink  on  the  debit  side.  Transfer  each  partner's 
profit  to  the  credit  side  of  his  personal  account. 

4.  Close  each  partner's  personal  account  into  his  capital  account  as 
follows: 

a)  Enter  the  balance  in  red  ink  on  the  debit  side  under  the  name 
of  the  capital  account,  as,  D.  E.  Martin,  Capital. 

b)  Rule  the  account. 

c)  Transfer  the  balance  in  black  ink  to  the  credit  side  of  the 
capital  account,  writing  the  name  of  the  partner,  personal. 


174  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

5.     Close  the   capital  accounts   as  you   have   before    by  net   worth. 
Take  a  proof  trial  balance  of  the  ledger  after  closing. 
Write  up  the  bank  statement  from  your  pass  book  and  your  checks. 
Submit  all  of  your  books  to  your  teacher  for  inspection. 

ANALYSIS  OF  RESULTS 

Every  progressive  business  man  desires  more  information  about  his 
business  than  simply  the  results  of  the  Trading  and  Profit  and  Loss  state- 
ments. He  wishes  to  make  comparisons  month  by  month  and  year  by 
year.    The  best  way  to  do  this  is  by  computing  percentages. 

Some  of  the  most  important  per  cents  are  found  as  follows: 

Gross  Trading  Profit 


Per  cent  of  Gross  Trading  Profit  = 


Per  cent  of  Net  Profit  on  Investment  = 


Cost  of  Goods  Sold 

Partner's    Net    Profit 


Partner's   Investment 


Per  cent  of  Net  Profit  on  Total  Cost  = 

Net  Profit 


Cost  of  goods  sold  -f-  all  expenses  of  selling  and  administration 

Exercise  36.     The  following  per  cents  are  to  be  found  by  using  the 
results  of  your  August  work.    • 

1.  Find  the  per  cent  of  gross  trading  profit. 

2.  Find  the  per  cent  of  net  profit  on  the  total  cost. 

3.  Find  the  per  cent  of  net  profit  on  D.  E.  Martin's  investment. 

4.  Find  the  per  cent  of  delivery  expense  on  the  sales. 

5.  Find  the  per  cent  of  returns  and  allowances  on  sales. 

6.  Find  the  per  cent  of  total  expenses  on  the  total  cost. 

Exercise  37.     On   journal   paper,    make   the   memorandum   and   the 
journal  entries  for  the  following: 

G.  C.  Varden  and  L.  N.  Worth  formed  a  copartnership,  August  1  to 
engage  in  the  wholesale  hardware  business. 

G.  C.  Varden  invested  the  following  assets  and  liabilities: 

Cash,  $1725 

Store  building  and  lot,  $8720 

Rent  due  from  tenants,  $45 

Motor   truck,  $1285 

Gasoline  and  other  motor  truck  supplies,  $15 

Merchandise,  per  inventory,  $4785.25 

C.  Evans'  note  for  $875,  dated  July  11,  payable  60  days  after  date, 

with  interest  at  6  % 


JOBBING  FURNITURE  175 

John  Cary  owes  on  account,  $987.50 

G.  C.  Varden  owed  B.  Edgar  on  account,  $715 

He  owed  a  note  in  favor  of  Farrar  &  Co.,  for  $6000,  dated  June  25, 

payable  3  months  after  date. 

L.  N.  Worth  invested  the  following  assets  and  liabilities: 

Cash,  $2125 

Office  Furniture,  $62.75 

C.  &  N.  W.  R.  R.  Stock,  20  shares  at  108J 
Merchandise,  per  inventory,  $6316.20 

H.  I.  Haines'  note  for  $3756.25,  dated  July  8,  payable  60  days  after 
date 

D.  E.  Barber's  note  for  $2115.75,  dated  June  16,  payable  3  months 
after  date,  with  interest  at  6% 

L.  N.  Worth  owed  a  note  in  favor  National  Exchange  Bank  for  $2500, 

dated  July  21,  payable  30  days  after  date. 

He  owed  a  note  favor  of  F.  A.  Hills  for  $575,  dated  July  22,  payable 

30  days  after  date,  with  interest  at  6%. 

Wherever  discount  is  to  be  computed,  6  %  is  to  be  used. 

Exercise  38.  Make  the  entries  on  journal  paper  for  the  following 
transactions.  Use  the  same  trading  accounts  that  you  have  been  using 
in  Set  VI. 

May       2.     Paid  for  freight  on  purchases,  $107.50. 
5.     Paid  for  packing  material,  $11.25. 

8.     Allowed  M.  Spreng's  claim  for  damaged  goods,  $15.20. 
15.     Returned  goods  to  C.  Brennan  valued  at  $31.85. 
17.     Goods  were  taken  from  stock  for  use  in  the  store,  $7.50. 
20.     Allowed  N.  Rice's  claim  for  overcharge,  $6.75. 
25.     Paid  freight  on  purchases,  $112.45. 
28.     Benton  &  Co.  allowed  our  claim  for  shortage,  $12.75. 

30.  The  railroad  company  refunded  $8.20  as  an  overcharge 

on  the  freight  bill  of  the  25th. 

31.  The  purchases  amounted  to  $10,175.40. 
31.     The  sales  amounted  to  $8432.65. 

31.  Transfer  to  Purchases  from  Delivery  Expense,  $37.85r 
the  value  of  the  services  rendered  in  hauling  purchaser 
to  the  warehouse. 

31.     Paid  shipping  clerk's  wages,  $40. 

Exercise  39.     Open  the  trading  accounts  on  ledger  paper. 

1.  Enter  the  inventory  of  merchandise  on  hand,  May  1,  $2138.25. 

2.  Post  the  entries  to  the  trading  accounts. 

3.  Use  $6078.75  as  the  inventory  of  merchandise  on  hand  May  31. 
Make  a  trading  statement. 

4.  Close  all  trading  accounts. 


176  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Exercise    40.  a)       From  the  following  trial  balance  and  inventories, 
make  Trading  and  Profit  and  Loss  statements,  December  31,  19 — 

Chas.  Smith $12500.00 

James  Carson 12500.00 

Real  Estate $15500. 00 

Horse  and  Wagon 375.50 

Office  Fixtures 62.15 

Notes  Receivable 5172.75 

Accounts  Receivable 7318.45 

Cash 1856.20 

Notes  Payable 4378 .  45 

Accounts  Payable 3124.80 

Purchases 11975 .  50 

Freight  In 386.25 

Sales 10657.45 

Expense 315.85 

Merchandise  Discount 42.75 

Interest 8.10 

Stable  Expense 51 .  20 

Insurance ■  96 .  00 

$43160.70       $43160.70 

Accounts  Receivable  includes  all  the  accounts  of  customers;  Accounts 
Payable,  all  the  accounts  of  creditors. 

Inventories: 

Merchandise $  4578 .  25 

Expense 12 .  75 

Real  Estate 15345 .  00 

Horse  and  Wagon 371 .75 

Office  Fixtures 60 .  90 

Insurance 88 .  00 

b)  Make  a  statement  of  Assets  and   Liabilities  and  a  proof  of  the 
statements. 

c)  Open  the  following  ledger  accounts  and  close  them: 

1.  Freight  In 

2.  Purchases 

3.  Sales 

4.  Merchandise  Trading 

5.  Real  Estate 

6.  Horse  and  Wagon 

7.  Insurance 

8.  Office  Fixtures 

9.  Expense 

10.     Merchandise  Discount 


JOBBING  FUKNITURE  177 

REVIEW  QUESTIONS 

1.  What  is  a  bank  draft? 

2.  How  does  a  bank  draft  differ  from  a  check? 

3.  For  what  purpose  are  bank  drafts  used? 

4.  In  whose  favor  should  a  bank  draft  be  drawn?    Why? 

5.  How  should  a  check  to  buy  a  bank  draft  be  written? 

6.  What  entries  does  the  remitter  of  a  bank  draft  make? 

7.  What  is  a  personal  draft? 

8.  Describe  the  parties  to  a  personal  draft. 

9.  For  what  purpose  are  three-party  sight  drafts  drawn? 

10.  Give  the  entry  for  each  of  the  parties  to  a  three-party  sight  draft. 

11.  What  is  the  purpose  of  a  two-party  sight  draft? 

12.  Explain  how  a  two-party  sight  draft  is  collected. 

13.  Explain  the  straight  bill  of  lading  drawn  in  triplicate. 

14.  What  is  the  object  of  an  order  bill  of  lading?    How  does  it  differ  from  a  straight 
bill  of  lading? 

15.  Explain  the  necessary  steps  in  making  shipments  by  freight  C.  O.  D. 

16.  Are  bills  of  lading  negotiable? 

17.  Explain  the  entry  and  the  posting  of  C.  O.  D.  sales. 

18.  How  are  shipments  made  by  express  C.  O.  D.  ? 

19.  How  is  the  money  usually  returned? 

20.  Why  is  it  best  in  a  large  business  to  keep  several  trading  accounts  instead  of  one 
merchandise  account? 

21.  For  what  should  the  Purchases  account  be  debited  and  credited? 

22.  For  what  should  Freight  In  be  debited  and  credited? 

23.  How  should  Freight  In  be  closed? 

24.  How  should  Purchases  be  closed? 

25.  For  what  should  the  Sales  account  be  debited  and  credited? 

26.  How  should  Sales  be  closed? 

27.  How  should  Merchandise  Trading  be  closed? 

28.  For  what  should  Delivery  Expense  be  debited  and  credited? 

29.  For  what  should  Real  Estate  be  debited  and  credited? 

30.  For  what  should  Real  Estate  Expense  and  Income  be  debited  and  credited? 

31.  Why  should  personal  accounts  with  proprietors  be  kept? 

32.  For  what  should  the  partners'  personal  accounts  be  debited  and  credited? 

33.  How  should  a  cash  sale  less  a  discount  be  entered? 

34.  What  is  the  object  of  the  bill  book? 

35.  How  do  you  prove  the  Notes  Receivable  Book?    The  Notes  Payable  Book? 

36.  What  is  a  statement  of  account?    How  does  it  differ  from  an  invoice? 

37.  To  whom  are  statements  of  account  sent?    How  often? 

38.  Why  is  a  Merchandise  Discount  column  kept  on  each  side  of  the  cash  book? 

39.  How  is  each  Merchandise  Discount  column  posted? 

40.  What  is  the  object  of  keeping  an  Expense  column  on  the  cash  book?    How  is  it 
posted? 


CHAPTER  XXI 
TIME  DRAFTS 


Personal  Drafts  may  be  made  payable  at  some  future  date.  They  are 
then  called  time  drafts.    Time  drafts  may  be  payable: 

1.  A  certain  time  after  date,  or 

2.  A  certain  time  after  sight. 

Time  drafts  may  be  used  for  many  of  the  same  purposes  as  sight 
drafts.  They  may  be  three-party  or  two-party  drafts.  The  time  draft 
payable  after  date  is  the  more  common  of  the  two  but  is  used  much  less 
than  sight  drafts. 

The  theory  of  time  drafts  is  the  same  as  that  of  sight  drafts.  The 
drawer  owes  the  payee.  The  drawee  owes  the  drawer.  The  drawer  asks  the 
drawee  to  pay  the  money  at  some  future  time  instead  of  at  once. 

Threb-*party  Time  Draft 


--^t^^^iCy  ^uC-, 


.t      (/Uist^'J?/   2~ 


PAY  TO  THE  ORDBR  OF 


.19 


Dollars 


No.  /TjT  l)ni.J4^;yy/./y 


D.  E.  Bailey  draws  this  draft  and  sends  it  to  the  payee,  N.  C.  Stout. 
Mr.  Stout  sends  it  to  the  drawee,  M.  I.  Mason,  to  get  his  written  consent 
to  the  draft.     M.  I.  Mason  gives  his  consent  by  accenting  the  draft. 

To  Accept  a  Draft.  The  drawee  accepts  the  draft  by  writing  across 
the  face  of  the  draft,  Accepted,  with  the  date,  and  his  signature.  He  may 
also  make  it  payable  at  some  bank  if  he  desires.     The  draft  is  now  called 

178 


TIME  DRAFTS 


179 


an  acceptance.  The  act  of  accepting  the  draft  has  the  same  effect  as  the 
giving  of  a  promissory  note. 

The  payee  receives  the  acceptance  the  same  as  he  would  receive  a 
promissory  note. 

The  entries  for  a  three-party  time  draft  are  all  made  in  the  journal. 

The  drawer,  D.  E.  Bailey,  makes  the  following  entry  when  he  draws  the 

draft  : 

Drawer's  Entry 


6  0  ~^&£tzS, 


s^A^z^r-, 


7yJ~C 


yj~c 


The  drawer  then  sends  the  draft  to  the  payee,  N.  C.  Stout.    He  makes 

no  entry  when  he  receives  the  draft,  but  sends  it  to  the  drawee,  M.  I.  Mason 

for  acceptance.     The  drawee  accepts  the  draft  and  sends  it  to  the  payee, 

N.  C.  Stout. 

Drawee's  Entry 


'■<ir 


cntt&J 


'-^zz^U: 


y^c 


ysc 


The.  payee  makes  the  following  entry  when  he  receives  the  accepted 

draft : 

Payee's  Entry 


JT 


'/0- 


yj~c 


180 


METROPOLITAN  SYSTEM  OP  BOOKKEEPING 


Three-party  time  drafts  are  also  drawn,  payable  at  a  certain  time 
after  sight.  If  the  time  is  sixty  days,  the  draft  may  read,  At  sixty  days' 
sight  or  Sixty  days  after  sight.  These  expressions  mean  that  the  draft  is 
payable  sixty  days  after  it  has  been  accepted  by  the  drawee.  The  date  of 
maturity  is,  then,  sixty  days  after  the  date  of  acceptance  on  the  draft  and 
not  sixty  days  after  the  date  on  which  the  draft  is  drawn. 

Recording  Drafts  in  the  Bill  Books.  All  time  drafts  must  be  recorded 
in  the  bill  book.  The  details  for  this  draft  in  the  Notes  Receivable  Book 
of  N.  C.  Stout  are  as  follows: 

Notes 


Left  Page 

no. 

WHEN 
RECEIVED 

MAKER  OR 
DRAWEE 

INDORSER  OR^j 
DRAWER 

IN  WHOSE 
FAVOR 

FOR  WHAT 
RECEIVED' 

WHERE 
PAYABLE 

DATE 

TIME 

1 

19— 
Apr. 

5 

M.  I.  Mason 

D.  E.  Bailey 

N.  C.  Stout 

On  acct 

Natl.  Ex.  Bk. 

Apr. 

2 

60  da. 

Receivable 


Right  Page 

AMOUNT 

INT. 

RATE 

WHEN  AND  HOW  DISPOSED  OF 

LEFT  FOR 
COLLECTION 

DATE  PAID 

REMARKS 

1  | 2  |  3  |  4|  5  |  6  |  7|  8  |  9 

10 

11 

12 

iy— 

1.1 

750 

— 

May 

23 

June 

1 

At  bank 

The  record  of  When  and  how  disposed  of  is  not  entered  until  the  note 
is  paid  or  otherwise  disposed  of. 

The  details  in  the  Notes  Payable  Book  for  the  record  of  the  drawee, 
M.  I.  Mason,  are  as  follows: 

Notes 


Left  Page 

no. 

WHEN 
GIVEN     J 

MAKER  or 
DRAWEE 

INDORSER  OR 
DRAWER 

IN  WHOSE 
FAVOR 

FOR  WHAT 
GIVEN 

WHERE 
PAYABLE 

DATE 

TIME 

9 

19— 
Apr. 

4 

M.  I.  Mason 

D.  E.  Bailey 

N.  C.  Stout 

On  acct. 

Natl.  Ex.  Bk. 

Apr. 

2 

60  da. 

Right  Page 


Payable 


INT. 
RATE 

WHEN  AND  HOW  DISPOSED  OP 

AMOUNT 

DATE  PAID 

REMARKS 

111  213 

41  5 

6  |  7  !  8 

9 

10  |  11 

12 

19— 

1 

750 

- 



June 

Cbgd.  at  bank 

TIME  DRAFTS 


181 


The  record  of  When  and  how  disposed  of  is  not  made  until  the  note 
is  paid. 

Rules  for  Three-Party  Time  Drafts: 

The  Drawer's  Entry  when  he  draws  the  draft  is 

Payee  to  Drawee 
The  Payee's  Entry  when  he  receives  the  accepted  draft  is 

Notes  Receivable  to  Drawer 
The  Drawee's  Entry  when  he  accepts  a  draft  is 

Drawer  to  Notes  Payable 
When  a  time  draft  is  paid,  the  payee  makes  an  entry  in  his  cash  book 
crediting  Notes  Receivable  the  same  as  if  he  had  received  cash  for  another's 

note. 

N.  C.  Stout's  Cash  Receipts 


^W- 


/^W^/fe^^^z^^^x  /^^y^^a^c^^^^c^' 


y^c 


The  drawee  of  the  draft  makes  the  same  entry  that  he  would  if  he 
had  paid  his  note. 


M.  I.  Mason's  Cash  Payments 


> 


u^u.-^ / 


/(^Lk^j  /^^^z^-cUy '^z^a^v-^y/^S^truy/-^ 


y^Tc 


Payable  at  a  Bank.  To  make  a  note  or  acceptance  payable  at  the 
bank  is  equivalent  to  a  written  order  on  the  bank  to  pay  the  amount  of  the 
draft  and  take  it  out  of  the  acceptor's  account.  No  check  is  necessary, 
as  making  the  note  or  the  acceptance  Payable  at  National  Exchange  Bank 
may  take  the  place  of  a  check. 

A  few  days  before  the  draft  is  due,  the  payee  sends  it  to  the  drawee's 
bank,  either  through  his  bank  or  direct.  At  maturity  most  banks  charge 
the  draft  at  once  to  the  drawee's  account  and  send  him  the  canceled  draft 
and  a  Charge  or  Debit  Slip.  The  Charge  Slip  is  made  out  in  duplicate, 
the  original  being  turned  over  to  the  bookkeeper  of  depositors'  accounts 
and  the  duplicate  sent  to  the  depositor.  (See  illustration  of  Charge  Slip 
on  page  182) 

Many  banks  prefer  to  notify  their  depositors  by  telephone  or  by 
mail  before  paying  an  acceptance  or  note  payable  at  the  bank.  The  de- 
positor may  instruct  the  bank  to  charge  it  to  his  account,  or  he  may  agree 
to  send  a  check  in  payment. 

In  your  practice  work  both  methods  of  paying  will  be  illustrated. 


182 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Charge  Slip 


THE  NATIONAL 

EXCHANGE  BANK 

OF    MILWAUKEE 

Milwaukee,  Wis. 

,  August 

10, 

19— 

DEBIT 

E.  B.  Morris  &  Co 

_ 

$225.00 

City. 

For      3C 

-day  note 

Due 

August  10, 

19— 

Favor 

C.  E.  Magee. 

* 

A.  G. 

Schultz, 

Cashier. 

Left  Check  Stub 


As  soon  as  the  drawee  is  notified  that  the  draft  has  been  charged, 
he  must  make  an  entry  in  his  cash  book  for  the  note  or  acceptance.     He 

must  also  make  the  records  in  the 
bill  book  and  on  the  right  and  left 
check  stubs.  The  amount  must  be 
subtracted  from  the  bank  balance. 
The  form  of  the  record  on  the  left 
check  stub  is  here  illustrated. 


Uu*Lt> 


yj~c 


Two-party  Time  Drafts.  Time  drafts  may  be  used  for  the  purpose 
of  collecting  accounts  and  of  collecting  all  or  a  part  of  an  invoice  sold  on 
special  terms,  such  as,  80-day  draft,  draft  at  10  days7  sight,  etc.  These 
drafts  may  be  drawn  a  certain  number  of  days  after  date  or  at  a  certain 
number  of  days'  sight.  They  may  be  made  payable  to  the  drawer  by 
writing  in  the  words  Myself  or  Ourselves  or  they  may  be  made  payable 
to  a  bank  for  collection. 

The  draft  is  sent  to  the  drawee  for  acceptance.  When  he  accepts  the 
draft,  he  makes  the  same  entry  in  the  journal  as  for  a  three-party  draft. 
He  debits  the  drawer  and  credits  Notes  Payable. 

When  the  drawer-payee  receives  this  acceptance,  he  makes  an  entry 
in  the  journal  debiting  Notes  Receivable  and  crediting  the  drawee. 

Two-party  drafts  after  date  may  be  held  by  the  drawer  until  they 
are  due  and  then  given  to  a  bank  for  collection,  if  goods  were  sold  on  those 
terms. 

Time  drafts  cannot  be  transferred  to  others  nor  discounted  without 
first  having  them  accepted.  Any  acceptance  may  be  discounted  in  the 
same  way  as  a  note  since  an  acceptance  is  just  as  much  a  promise  to  pay 
as  a  note. 


TIME  DRAFTS  183 

Rules  for  Two-Party  Time  Drafts. 

The  Drawer-Payee's  Entry  when  he  receives  the  accepted  draft  is 

Notes  Receivable  to  Drawee 
The  Drawee's  Entry  when  he  accepts  the  draft  is 

Drawer  to  Notes  Payable 
Exercise  41.    Time  Drafts. 

1.  March  3.     Student  draws  a  draft  on   C.    L.   Lee,    Dubuque,    la., 

in  favor  of  G.  E.  Capper,  St.  Louis,  payable  30  days 
after  date,  for  $280.    It  is  accepted,  March  5,  payable 
at  Second  National  Bank. 
Draw  the  draft,  show  the  acceptance,  and  make  the  entry  for  each 
party. 

2.  March  5.     C.  L.  Voss,  Chicago,  sells  an  invoice  of  goods  to  D.  E. 

Layton,  for  $375.75  on  the  terms,  draft  at  10  days' 
sight.     The  draft  is  accepted  March  7. 
Draw  the  draft,  show  the  acceptance,  and  make  the  entry  for  each 
party. 

3.  March  8.     Student  draws  a  draft  at  30  days'  sight  on  G.  A.  Lake 

to  collect  a  past  due  account  amounting  to  $245.10. 
The  draft  is  accepted  March  10,  payable  at  Union 
National  Bank. 
Draw  the  draft,  show  the  acceptance,  and  make  the  entry  for  each 
party. 

4.  March  13.     Student   discounts   the   acceptance  in   transaction  3  at 

the  Marine  National  Bank.       The  bank  charges  6% 
discount. 
Show  the  indorsement  and  make  the  Student's  entries. 

5.  March  14.     J.  E.  Brock,  New  York  City,  draws  a  draft,  payable 

30  days  after  date,  for  $250,  in  favor  of  M.  N.  Gerber, 
Albany,   N.   Y.,  on  C.  L.  Andrews  &  Co.,  Trenton, 
N.  J.     The  draft  is  accepted  March  16. 
Make  the  entry  for  each  party. 

6.  March  18.     M.  N.  Gerber  transfers  the  draft  in  transaction  5  to  G. 

I.  Turner,  less  discount  at  6  %  for  the  unexpired  time. 
Show  the  indorsement  and  make  the  entry  for  each  party. 

7.  March  20.     B.  E.  Yoder  draws  a  draft  on  Student,  payable  10  days 

after  date,  for  $1167.25,  which  is  accepted  March  22, 
payable  at  First  National  Bank. 
Make  the  entry  for  each  party. 

8.  March  30.     The   First    National   Bank   charges   the   acceptance   in 

transaction  7,  to  the  Student's  account. 
Make  the  Student's  entry. 

9.  March  31.     B.  E.  Yoder's  bank  reports  the  collection  of  this  draft, 

collection   charge  TV%. 
Make  B.  E.  Yoder's  entry. 


CHAPTER  XXII 

JOBBING   FURNITURE 

SET  VI 
Transactions  for  September  1-15 

September  1.  The  proprietors  have  decided  to  increase  their  capital 
by  each  investing  $3000  additional.    D.  E.  Martin  invests  the  following: 

C.  D.  Forester's  note,  dated  August  10,  payable  60  days  after  date, 
with  interest  at  6%,  for  $1500. 

Cash  for  the  balance. 

Compute  the  interest  for  the  expired  time.  Make  a  journal  entry 
for  the  entire  investment  and  enter  the  cash  in  the  cash  book  as  you  did 
August  1. 

Have  you  taken  your  cash  balance  for  August  over  to  the  top  of  a  new  page,  dating  it  Sept.  1? 

H.  L.  Kline  invests  the  following: 

A  note  of  E.  B.  Brewster  &  Co.,  dated  August  16,  payable  3  months 
after  date,  for  $1750. 

Cash  for  the  balance. 

Compute  the  discount  on  the  note  for  the  unexpired  time  at  6%. 

Make  the  entries  the  same  as  for  D.  E.  Martin's  investment. 

Do  not  forget  the  necessary  records  for  the  notes. 

This  invoice  is  received  from  Klingman  Furniture  Co.  In  accordance 
with  our  instructions  they  have  prepaid  the  freight  and  charged  it  to  us. 

Enter  the  amount  of  the  goods  purchased,  without  the  freight,  in  the 
purchase  book.  Make  a  journal  entry  for  the  freight,  debiting  Freight  In 
and  crediting  Klingman  Furniture  Co. 

The  bank  has  charged  your  acceptance  due  today,  favor  the  E.  J. 
Ranney  Co.,  to  your  account. 

No  check  is  necessary. 

The  bank  has  the  right  to  do  this  since  in  your  acceptance  you  made 
it  payable  at  the  bank.  You  must  make  the  proper  records  on  the  right 
and  left  check  stubs  as  well  as  in  the  bill  book. 

What  should  you  receive  from  the  bank?  What  account  should  be  debited  for  the  amount  charged 
by  the  bank? 

Deposit  the  checks  received  today. 

184 


JOBBING  FURNITURE  185 

September  2.     Chas.  Osgood,  City,  orders: 
12  Oak  Dining  Tables 

5  Oak  Library  Tables 

6  Mahogany  Parlor  Tables 
Terms:     note,  30  days  after  date. 
The  note  will  be  received  later.. 

J.  C.  Jenkins,  Dayton,  Ohio,  orders: 
15  Felt  Mattresses 

6  Mahogany  Dressers 

5  Mahogany  Parlor  Tables 

Terms:     3/5,  2/10,  net  30  days. 

Receive  of  D.  C.  Lanning  this  check  on  account. 

Pay  Simmons,  Gardner  &  Co.  the  balance  due  them  on  their  August 
account. 

September  3.  Receive  this  check  in  payment  of  the  rent  of  the  rooms 
in  the  store  building. 

What  account  should  be  credited  for  income  on  Real  Estate? 

D.  E.  Beale,  St.  Paul,  Minn.,  orders: 
5  Mahogany  Parlor  Tables 

He  is  desirous  of  receiving  the  goods  as  soon  as  possible,  and  instructs 
you  to  ship  the  goods  by  express  C.  O.  D. 

Make  out  the  invoice  and  receipt  it.  Take  an  express  envelope  and 
fill  it  out  as  follows: 

On  the  reverse  side,  fill  in  after  Goods  Shipped  to,  the  name  and  ad- 
dress of  the  buyer.  Fill  in  the  Amount  of  Bill.  After  Shipper's  Instructions, 
write  Collect  all  charges. 

On  the  face  of  the  envelope  fill  in  the  name  and  address  of  your  firm. 

Do  not  open  an  account  with  D.  E.  Beale  but  enter  it  the  same  as  the 
freight  C.  O.  D.  sale  which  you  have  had. 

Receive  this  check  from  J.  C.  Reed  for  the  invoice  of  August  24,  less 
discount. 

September  4.     B.  L.  Duncer,  City,  orders: 
5  Brass  Bedsteads 
12  Hair  Mattresses 

5  Oak  Chamber  Sets 
Terms:     account,  30  days. 

K.  L.  Mears,  Syracuse,  N.  Y.,  orders: 
8  B.  E.  Maple  Dressers 
12  Felt  Mattresses 

6  Mahogany  Parlor  Suites 

Terms:     note  at  30  days  for  $375;  balance  on  account. 

He  sends  the  note  with  the  order. 

This  invoice  is  received  from  F.  Bishop  &  Co.     A  30-day  draft  ac- 


186  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

companies  it.     Accept  the  draft  if  it  agrees  with  the  invoice. 

What  is  the  meaning  of  accepting  a  draft?    What  account  should  be  credited?    Why? 

Do  not  forget  to  record  this  acceptance  in  the  bill  book. 
Receive  this  note  from  Chas.    Osgood   in    payment  of  the  invoice  of 
September  2. 

Does  the  face  of  the  note  agree  with  the  amount  of  your  sale  to  him? 

Record  it  in  the  bill  book. 

September  5.    Receive  this  check  from  F.  I.  Barber,  on  account. 
J.  C.  Jenkins  returns  5  Felt  Mattresses,  as  he  finds  that  he  has  too 
many  for  his  trade. 

Give  him  a  credit  memorandum.    Your  entry  must  be  the  reverse  of  the 
entry  that  you  made  when  you  sold  him  the  goods. 
D.  C.  Scott,  Louisville,  Ky.,  orders: 

7  Oak  Davenports 

5  Morris  Chairs 

3  C.  Walnut  Chamber  Sets 
Terms:     account,  30  days. 
C.  E.  Randall,  Albany,  N.  Y.,  orders: 

9  Mahogany  Dressers 
Terms:     draft  favor  National  Exchange  Bank,  with  B/L  attached. 
As  Mr.  Randall's  credit  is  not  known,  he  instructs  you  to  bill  the 
goods  in  this  way. 

What  kind  of  a  bill  of  lading  must  be  used?    Why?    What  is  done  with  the  draft  and  bill  of  lading? 
Do  not  open  an  account  with  C.  E.  Randall.    What  account  should  be  debited? 

September  7.  Receive  this  express  check  in  payment  of  the  goods 
shipped  to  D.  E.  Beale  on  the  3d. 

Credit  the  same  account  that  you  debited  when  you  made  the  sale 
to  him. 

This  invoice  is  received  from  Chas.  Strang  &  Co.  The  goods  are 
billed  f.  o.  b.  Milwaukee.  This  means  that  the  seller  should  pay  the 
freight.  By  some  mistake,  they  failed  to  pay  the  freight.  They  instruct 
us  to  pay  the  freight  bill  and  charge  it  to  their  account. 

Enter  the  invoice  in  the  usual  way.  You  will  receive  the  freight  bill 
later. 

Receive  this  check  from  G.  L.  Bennett,  on  account. 
Receive  this  check  from  J.  C.  Jenkins  for  his  invoice  of  the  2d,  less 
discount. 

Turn  to  your  journal,  you  will  find  a  credit  there  to  J.  C.  Jenkins7 
account.     Deduct  it  before  computing  the  discount. 

Pay  this  bill  for  painting  a  sign  to  be  placed  on  the  building.  Charge 
it  to  Expense. 

Pay  F.  Bishop  &  Co.  the  balance  of  their  August  account. 

Deposit  all  the  checks  on  hand;  Mo  collection  on  out-of-town  checks, 
except  express  checks. 


JOBBING  FURNITURE  187 

September  8.     J.  G.  Hull,  City,  orders: 

8  Kitchen  Cabinets 

5  Mahogany  Music  Cabinets 

5  Oak  Davenports 
Terms:     account,  30  days. 

B.  L.  Duncer,  City,  orders: 

15  Oak  Dining  Tables 
Terms:     cash,  less  2%. 
This  check  is  received  in  payment. 

This  bill  of  Voss  &  Co.  is  for  repairs  to  the  building.    Pay  it  by  check. 

Is  this  a  real  or  a  nominal  element?  Does  it  increase  the  cost  of  the  building  or  simply  help  to  keep  it 
worth  its  cost? 

Mr.  Kline  has  returned  to  Chas.  Strang  &  Co.,  5  Oak  Dining  Tables 
as  they  do  not  seem  to  be  suitable  to  our  trade.  They  send  us  this  credit 
memorandum. 

Prove  cash  and  submit  your  cash  book  and  check  book  to  your  teacher 
for  approval. 

September  9.     This  bill  is  for  repairs  to  the  delivery  truck.     Pay  it. 

Is  this  a  nominal  or  a  real  element?    Is  it  an  asset  or  is  it  a  charge  against  income? 

Receive  this  check  from  H.  E.  King,  on  account. 

D.  G.  Paxton,  City,  orders: 

10  Felt  Mattresses 
6  Kitchen  Cabinets 

18  Oak  Dining  Chairs 
Terms:     2/10,  net  30  days. 

C.  G.  Yates,  Denver,  Colo.,  orders: 

8  Mahogany  Dressers 
12  Mahogany  Parlor  Tables 
6  Oak  Library  Tables 
Terms:  on  account. 

Mr.  Kline  has  arranged  with  C.  G.  Prang,  Receiver  in  bankruptcy, 
to  purchase  some  of  the  bankrupt  stock  at  90^  on  the  dollar.  The  de- 
duction is  made  on  the  invoice.  This  is  not  a  discount  but  simply  a  method 
of  lowering  the  price.  Pay  it  by  check.  Enter  the  net  amount  in  the 
purchase  book  and  in  the  cash  book.  Check  both  entries.  It  is  not  necessary 
to  open  an  account  with  the  receiver  of  the  bankrupt  stock  as  the  transaction 
is  closed  and  you  will  have  no  more  dealings  with  him. 

September  10.     C.  P.  Baker  &  Co.,  City,  order: 
15  Felt  Mattresses 
5  Kitchen  Cabinets 
Terms:     3/5,  2/10,  net  30  days. 


188  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

A.  Dorris,  City,  orders: 

5  Mahogany  Parlor  Tables 
10  Mahogany  Rockers 

6  Oak  Dining  Tables 
Terms:     account,  30  days. 

K.  L.  Mears,  Syracuse,  N.  Y.,  orders: 
4  C.  Walnut  Bedsteads 
3  C.  Walnut  Chamber  Sets 
Terms:     1/10,  net  30  days. 

He  instructs  you  to  ship  the  goods  to  D.  G.  Foss,  Utica,  N.  Y.  He  also 
asks  you  to  prepay  the  freight  and  charge  it  to  his  account. 

Make  out  the  invoice  to  K.  L.  Mears,  but  on  it  write,  Shipped  to  D.  C. 
Foss,  Utica,  N.  Y.  The  bill  of  lading  should  be  made  out  to  D.  G.  Foss. 

Pay  this  freight  bill  and  charge  it  to  K.  L.  Mears'  account,  as  it  is 
simply  an  accommodation  to  him. 

The  bank  reports  the  sight  draft  on  C.  E.  Randall  collected.  Collect- 
ion charge,  50^. 

September  11.     M.  E.  Newton,  Wheeling,  W.  Va.,  orders: 
12  Oak  Dining  Chairs 
8  Oak  Library  Tables 
Terms:     draft  favor  National  Exchange  Bank,  with  B/L  attached. 
Mr.  Newton  has  not  yet  given  us  sufficient  information  in  reference 
to  his  credit  standing  to  enable  us  to  sell  him  on  account.     He  instructs 
us  to  send  these  goods  by  freight  C.  O.  D. 

Study  a  similar  transaction  that  you  have  had. 

What  kind  of  a  bill  of  lading  is  required  for  all  C.O.D.  sales  by  freight? 

What  should  be  done  with  the  invoice?   With  the  draft  with  B/L  attached? 

J.  A.  Reiss  &  Co.,  City,  order: 
15  Brass  Bedsteads 
6  B.  E.  Maple  Dressers 
15  Hair  Mattresses 
Terms:  on  account. 

This  invoice  is  received  from  the  E.  J.  Ranney  Co.  The  goods  have 
been  shipped  direct  to  C.  L.  Larson,  City,  oh  his  order  to  us.  We  in- 
structed the  E.  J.  Ranney  Co.  to  pay  the  freight  on  this  shipment  and  to 
charge  it  to  our  account. 

Enter  the  amount  of  the  merchandise  bought  in  the  purchase  book  in 
the  usual  way.    Enter  the  amount  of  the  freight  in  the  journal. 

What  account  should  be  debited  just  the  same  as  if  we  had  paid  the  freight  on  the  arrival  of  the 
goods?   To  whom  do  we  owe  the  amount  of  the  freight?   Credit  their  account. 

Make  out  an  invoice  for  the  goods  bought  of  the  E.  J.  Ranney  Co., 
and  send  it  to  C.  L.  Larson,  City.     Terms:  account  30  days. 

Pay  this  freight  bill  on  goods  bought  of  Chas.  Strang  &  Co.,  and  charge 
it  to  their  account. 


JOBBING  FURNITURE  189 

September  12.  This  bill  for  advertising  is  a  cash  bill  and  should  be 
paid  at  once.  The  discount  is  already  deducted.  Do  not  enter  the  discount 
in  the  cash  book. 

G.  L.  Bennett,  Lansing,  Mich.,  orders: 
3  Kitchen  Cabinets 
12  Mahogany  Chiffoniers 
6  Oak  Chamber  Sets 
Terms:     note  at  30  days  with  interest  at  6%,  for  $425;  balance 
on  account. 

This  note  accompanies  the  order. 

D.  G.  Paxton,  City,  reports  1  Kitchen  Cabinet  in  an  unsalable  condi- 
tion. As  this  cabinet  was  reported  in  good  condition  when  it  left  the  hands 
of  our  delivery-man,  we  have  refused  to  allow  him  full  credit  for  it.  We 
have'  compromised  and  allowed  him  half  the  value.  Make  out  a  credit 
memorandum  for  one-half  the  selling  price  of  1  Kitchen  Cabinet. 

Pay  Chas.  Strang  &  Co.  the  balance  due  them  on  the  invoice  of  the  7th. 

This  invoice  is  received  from  the  Atlas  Parlor  Furniture  Co.  The  goods 
were  shipped  by  our  order,  direct  to  J.  G.  Hull,  City. 

Make  the  entries  as  in  a  previous  transaction  of  the  same  kind. 

Make  out  an  invoice  to  J.  G.  Hull,  City,  for  these  goods.  Bill  them  on 
account. 

September  15.  This  check  is  received  from  D.  L.  Ellery  for  his  note 
due  today.     Cancel  the  note  and  return  to  the  maker. 

This  bill  is  for  printing  circulars  to  be  sent  to  the  trade.  Pay  by 
check. 

Receive  this  check  from  C.  P.  Baker  &  Co.,  for  the  invoice  of  the  10th, 
less  discount. 

Third  Report.  Prove  cash,  make  a  report,  and  hand  in  your  Outgoing 
Papers. 

Post  from  all  the  books.  Do  not  close  any  of  the  books  of  entry  nor 
post  any  totals. 

Open  the  two  new  customers'  accounts  on  page  12,  the  new  creditor's 
account  on  page  18,  and  the  other  new  account  on  page  24. 


CHAPTER  XXIII 
SHIPMENTS  AND   CONSIGNMENTS 


In  certain  lines  of  business  goods  are  frequently  shipped  by  one  firm 
to  another  to  be  sold  on  commission.  The  person  that  makes  a  business 
of  selling  on  commission  is  usually  called  a  commission  merchant  or  factor. 
Produce,  grain,  fruit,  poultry,  and  meats  are  frequently  shipped  in  this 
way;  pianos,  automobiles  and  sewing  machines  are  quite  often  shipped  in 
this  way,  while  many  other  articles  are  occasionally  shipped  to  be  sold  on 
commission. 

The  person  who  makes  the  shipment  is  called  the  consignor  or  principal. 
the  person  to  whom  the  goods  are  consigned,  the  consignee  or  agent. 

The  legal  effect  of  a  shipment  is  to  retain  the  title  and  control  of  the 
goods  while  in  the  hands  of  the  consignee  or  agent.  The  agent  must  use 
reasonable  skill  and  diligence  in  handling  the  goods,  and  must  account 
to  the  principal  for  the  goods  at  certain  times.  •» 

There  are  several  reasons  for  making  shipments  of  goods  to  be  sold  on 
commission  instead  of  selling  the  goods. 

1.  The  consignor  may  not  be  willing  to  trust  the  consignee  on  account. 
He  may  be  willing  to  trust  the  consignee  to  properly  handle  the  goods  and 
account  for  the  proceeds. 

2.  The  consignee  may  not  be  willing  to  buy  the  goods  because  they 
are  a  new  brand  or  because  a  demand  must  be  created  for  them.  He  may 
be  willing  to  assume  the  responsibility  of  properly  handling  them  and 
selling  them  on  commission. 

3.  In  the  case  of  fruits,  grains,  produce,  poultry,  etc.,  the  shipper 
may  not  know  the  market  price  in  the  consignee's  city.  For  that  reason, 
he  cannot  invoice  them  on  account,  but  makes  an  invoice  of  shipment  to  be 
sold  on  commission. 

Invoice  of  Shipment.  When  the  consignor  makes  a  shipment  to  be 
sold  for  his  account  and  risk,  he  makes  out  an  invoice  of  shipment  instead 
of  the  ordinary  invoice.  On  this  invoice  of  shipment  the  goods  are  usually 
listed  at  their  cost  price  or  with  no  prices  given.  Sometimes,  however,  the 
consignor  wishes  to  keep  the  cost  price  from  the  consignee.  In  that  case 
he  may  list  them  at  the  selling  price  or  at  a  fictitious  price.  The  first  plan, 
that  of  listing  them  at  the  cost  price,  is  the  one  most  commonly  used. 

190 


SHIPMENTS  AND  CONSIGNMENTS  191 

Invoice  op  Shipment 

Chicago,  III.,  August  3,  19 — 

Invoice  of  merchandise  shipped  to 

HESS  FURNITURE  CO., 

Peoria,  III. 

To  be  sold  for  the  account  and  risk  of  BRADFORD  PIANO  CO., 

Consignors. 


10 
5 
1 


Bradford  Pianos  No.  725  $265 

Chase  Pianos  No.  405  $310 

Bradford  B.  Grand  Piano  No.  935 


2650 

._ 

1550 

- 

485 

- 

4685 

Shipment  Account.  This  account,  with  the  name  of  the  consignee 
added,  is  opened  up  to  record  the  consignor's  dealings  with  the  consignee. 
It  is  not  a  sale,  so  the  entry  should  not  be  made  in  the  sales  book.  Part 
of  the  goods  have  been  taken  from  purchases  and  shipped  to  be  sold  on 
commission.  The  Purchases  account  must  be  credited  for  the  shipment 
when  it  is  made  at  cost.    The  journal  entry  should  be  made  as  follows: 

Shipt.  Hess  Furniture  Co.  Shipped  to  be  sold  on  $4685 

To  Purchases  10%  commission  $4685 

Report  to  be  made 

monthly 
10  Bradford  Pianos 

No.  725       $265.-$2650 
5  Chase  Pianos  , 

No.  405       $310.-$1550 
1  Bradford  Baby  Grand 

Piano  No.  935 


The  Shipment  account  should  be  opened  up  in  the  last  section  of  the 
ledger  and  not  in  the  section  with  the  personal  accounts. 

The  Shipment  account  should  be  debited  for  everything  paid  out  by 
the  consignor  for  the  shipment,  such  as,  freight,  drayage,  insurance,  etc. 
It  is  also  debited  for  any  cash  advanced  to  the  consignee  on  account  of  the 
shipment. 

The  Shipment  account  should  be  credited  for  all  returns  from  the 
shipment,  such  as,  cash,  goods  returned,  drafts  honored,  and  when,  instead 
of  receiving  cash,  the  consignee's  account  is  debited  for  the  net  returns 
of  the  shipment. 

Account  Sales.  When  the  consignee  has  sold  the  goods,  or  at  certain 
regular  intervals,  if  agreed  upon,  he  renders  a  statement  of  his  dealings 
for  the  consignor.  This  is  called  an  account  sales.  It  is  a  formal  statement 
in  detail  of  the  sales  made,  the  charges  for  freight,  drayage,  commission, 


192 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


insurance,  storage,  etc.,  and  the  net  returns  from  the  shipment,  called  the 

net  proceeds. 

Account  Sales 

Milwaukee,  Wis.,  November  10,  19 — 
Sold  by  E.  B.  HARRISON  &  CO. 
For  the  account  and  risk  of 

D.  L.  WHITE,  Grand  Rapids,  Mich.,  Consignor. 


Nov. 


1 

4 

10 


50  bbl.  Baldwin  Apples 
20  bbl.  Greening  Apples 
30  bbl.  Greening  Apples 

Charges 
Freight  $27.50     Drayage 
Advance 

2%  Commission 

Net  Proceeds 


$3.05 
2.95 
2.90 


$5.00 


152 
59 

87 


32 

100 

5 


50 


50 


97 


298 


138 


160 


50 


47 


03 


The  Commission  is  always  computed  on  the  net  sales,  that  is,  if  any 
goods  were  returned,  their  value  would  be  deducted  from  the  total  sales 
before  finding  the  commission. 

The  Advance  of  $100  means  that  the  consignor,  D.  L.  White,  either 
received  cash  from  the  consignee,  E.  B.  Harrison  &  Co.,  or  D.  L.  White 
drew  a  sight  draft  on  E.  B.  Harrison  &  Co.  on  account  of  the  shipment 
and  collected  it  through  a  bank.  The  drawing  of  a  sight  draft  on  account 
of  a  shipment  is  a  frequent  occurrence.  The  drawer,  D.  L.  White,  debits 
Cash  and  credits  the  Shipment  when  the  draft  is  paid. 

The  consignee  usually  remits  the  net  proceeds  by  check.  When  it 
is  received,  the  consignor  enters  it  in  his  cash  book,  as.  a  debit  to  Cash 
and  a  credit  to  the  Shipment  account.  No  entry  is  made  for  the  sales  or  for 
the  charges,  but  simply  for  the  net  proceeds.  Sometimes  the  consignee 
does  not  remit  the  net  proceeds  but  asks  the  consignor  to  charge  the  net 
proceeds  to  his  personal  account. 

The  entry  on  the  consignor's  books  would  be 
Consignee 

To  Shipt.  Consignee 

To  Close  Shipment  Account.  The  Shipment  account  is  a  nominal 
account  that  represents  a  loss  if  the  debit  side  is  the  larger  and  a  profit 
if  the  credit  side  is  the  larger.  If  there  are  any  goods  in  the  hands  of  the 
consignee  unsold  at  the  time  of  closing,  the  amount  of  the  inventory  must 
be  entered  in  the  account  before  closing,  and  brought  down  on  the  opposite 
side  after  closing. 


SHIPMENTS  AND  CONSIGNMENTS 


193 


,  X2^^t/#/ 


*f- 


,f- 


3/ 


v/ 
f 


/3*/S 


-% 


z*r£> 


>s 


t/^£  zs 


Ll 


("r 


/J~  /?u.S-)££trc£6€6j'£\tf:  I  q*t&  ZS" 


<p  $J^^l£  -g  U 


j"~<7<? 


L 


'i/i/ C  ^ 


Entries  for  Consignee.  The  account  which  the  consignee  keeps  on 
his  books  to  represent  his  responsibility  to  the  consignor  is  the  Consignment 
account.  The  name  of  the  firm  from  which  the  consignment  was  received 
and  the  number  is  always  included  in  the  name  of  the  account,  as,  Consign- 
ment M.  L.  Jasper  &  Co.  No.  1. 

The  Consignment  account  is  not  a  creditor's  account  and  should  be 
opened  up  in  the  last  section  of  the  ledger  and  not  in  the  creditors'  section. 

When  the  consignee  receives  the  goods  and  the  invoice  of  shipment, 
he  makes  no  entry  but  simply  a  memorandum  in  the  journal.  This  memo- 
randum should  state  what  was  received,  the  commission  to  be  allowed, 
and  any  special  provisions  in  reference  to  making  settlements. 

The  consignee  debits  the  Consignment  account  for  all  charges  paid 
when  the  goods  are  received  or  afterwards,  for  all  goods  returned  and 
allowances  made,  and  for  all  drafts  accepted  or  paid  for  the  account  of  the 
consignment. 

He  credits  the  Consignment  account  for  all  sales  of  consigned  goods. 
If  the  sales  are  for  cash,  he  enters  them  in  the  cash  book  as  a  credit  to  the 
Consignment  account.      If  they  are  on  account,   he  enters  them  in  the 
journal  as  follows: 
Customer 

To  Consignment 

They  must  not  be  entered  in  the  sales  book  because  they  are  not  sales 
of  goods  belonging  to  the  business. 

When  the  goods  have  been  sold,  or  sooner,  by  agreement,  the  consignee 
renders  an  account  sales  to  the  consignor.     He  then  makes  an  entry  in 
the  journal  debiting  the  Consignment  for  his  commission  and  for  any  other 
charge,  such  as  guaranty,  which  has  not  been  entered,  as  follows: 
Consignment 

To  Commission 


194 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


If  the  net  proceeds  are  paid  in  cash,  the  Consignment  is  debited  in  the 
cash  book,  thus  closing  the  Consignment  account. 

If  the  cash  is  not  remitted,  an  entry  is  made  in  the  journal  debiting 
the  Consignment  and  crediting  the  Consignor,  as  follows: 
Const.  J.  B.  Kris  &  Co.  No.  1 
To  J.  B.  Kris  &  Co 
In  posting  to  the  Consignment  account,  each  entry  should  be  explained 
in  the  ledger  account  so  as  to  facilitate  the  rendering  of  account  sales. 


*^^7~;?'z',:;^^^  o^Jf^ 


>^r^V 


"?- 

v(ay 

^ 

f 

/J 

/J 

oS7^ct^€t^a-ey  ~&   // 


7 


/3  ,  So  o 


/S3  O 


So 
IS 


7 

f 


r 
r 

7 


3ZS 
yss 


/Si  a 


Large  businesses  making  a  great  many  shipments  of  goods  to  be  sold 
on  commission  use  a  separate  Shipment  Ledger  in  which  the  details  of 
shipments  are  kept. 

In  the  same  way,  the  agent  or  consignee,  if  the  consignments  are  large 
in  number,  keeps  a  separate  Consignment  Ledger  in  which  to  enter  the 
details  of  consignments. 

Exercise  42.  J.  C.  Graf  makes  a  shipment  of  produce  to  D.  L.  Harter 
&  Co.,  to  be  sold  on  commission. 

a)  Make  the  entries  that  J.  C.  Graf  would  make. 

b)  Make  the  entries  that  D.  L.  Harter  &  Co.  would  make. 

c)  Show  the  Shipment  account  closed. 

d)  Show  the  Consignment  account  closed. 

March       8.     J.  C.  Graf  made  a  shipment  to  D.  L.  Harter  &  Co.,  to 

be  sold  on  commission,  as  follows: 
150  bbl.  Baldwin  Apples  at  $4.10 
100  bbl.  Greening  Apples  at  $3.95 

J.  C.  Graf  agrees  to  pay  a  commission  of  5    %. 

March  12.  D.  L.  Harter  &  Co.  received  the  shipment  of  goods 
from  J.  C.  Graf.  Paid  freight,  $21.25  and  drayage, 
$7.50. 


SHIPMENTS  AND  CONSIGNMENTS 


195 


March      15.     D.   L.   Harter  &   Co.   sold  50  bbl.   Greenings  at  $4.75 

to  C.  I.  Mass  for  cash. 
March      18.     J.  C.  Graf  drew  a  draft  at  sight  for  $200  on  D.  L.  Harter 

&  Co.,  on  account  of  the  shipment,  which  Harter  & 

Co.  paid. 
March      25.     D.    L.    Harter   &   Co.   sold   75   bbl.   Baldwins   at   $4.95 

and  50  bbl.   Greenings  at  $4.70  to  J.   I.   Coats,   on 

account,  10  days. 
March      30.     D.  L.  Harter  &  Co.  sold  75  bbl.  Baldwins  at  $4.90  to 

F.  E.  Ebert,  for  cash. 
March      30.     D.    L.    Harter    &    Co.    rendered    account   sales.      They 

deducted    their    commission    of    5%    and    the    other 

charges,  and  remitted  the  net  proceeds  to  J.  C.  Graf. 


CHAPTER  XXIV 
JOBBING    FURNITURE 

SET  VI 

Transactions  for  September  16-30 

September  16.  Your  note  favor  Price  Furniture  Co.  due  today  has 
been  charged  to  your  account  by  the  bank.  Take  your  pass  book  to  the 
bank  and  have  it  charged.    You  will  receive  the  receipted  note. 

What  gives  the  bank  the  right  to  charge  this  note  to  your  account?  What  effect  does  it  have  on 
your  cash  balance?    On  your  bank  balance? 

Write  a  check  in  favor  of  Cash  for  $5.  It  is  for  postage  stamps 
for  mailing  the  circular  letters  to  the  trade.  Charge  it  to  Advertising. 
You  have  also  used,  from  the  office  supplies,  envelopes*  worth  $1.50.  Your 
time  spent  in  filling  in  and  in  addressing  the  envelopes  is  worth  $2.25. 
Make  a  journal  entry  to  transfer  $3.75  from  Expense  to  Advertising. 
Explain  the  entry  fully.  The  object  of  this  is  to  make  the  Advertising 
account  show  the  total  expenditure  for  advertising  in  any  form.  The 
envelopes  were  charged  to  Expense  when  they  were  bought  and  your  salary 
as  bookkeeper  and  stenographer  will  be  charged  to  Expense  at  the  end  of 
the  month  when  it  is  paid. 

Discount  at  the  National  Exchange  Bank,  E.  B.  Brewster  &  Co.'s 
note  for  $1750.    The  bank  charges  6%  discount. 

Discounting  a  note  is  a  matter  of  agreement  with  the  bank.  The  bank 
must  be  satisfied  with  the  responsibility  of  the  maker  of  the  note  and  will 
require  your  firm  to  indorse  it  as  security  for  its  payment. 

Take  the  note  from  your  file,  calculate  the  discount,  make  out  the 
deposit  ticket,  and  take  to  the  bank  with  your  pass  book. 

Make  two  entries  in  the  cash  book  and  the  necessary  records  in  the 
bill  book  and  in  the  check  book. 

The  bank  reports  the  collection  of  the  draft  with  bill  of  lading  attached, 
on  M.  S.  Newton.     Collection  charge,  25j£. 

September  17.     Write  a  cash  check  for  $2.50  for  postage  stamps. 

The  firm  has  had  a  number  of  Circassian  Walnut  Bedsteads  that  have 
not  been  selling  well.  Mr.  Kline  has  offered  them  to  the  D.  G.  Luther  Co. 
to  be  sold  on  a  commission  of  10%.  They  have  asked  us  to  ship  all  that 
we  have,  as  they  have  a  customer  for  them. 

196 


JOBBING  FURNITURE  197 

Make  an  invoice  of  shipment  to  the  D.  G.  Luther  Co.,  Dubuque, 
Iowa,  at  cost,  for  11  C.  Walnut  Bedsteads.    Bill  them  at  $20.25. 

Make  the  entry  in  the  journal.  Do  not  forget  to  enter  the  details  of  the 
shipment  in  the  journal  entry.     Make  out  the  bill  of  lading  as  usual. 

September  18.     C.  M.  Morris,  Muskegon,  Mich.,  orders: 
5  Mahogany  Rockers 

He  has  instructed  us  to  ship  the  goods  by  express  C.  O.  D.,  as  he  wishes 
them  at  once.    We  have  allowed  him  2%  discount. 

Enter  the  sale  without  deducting  the  discount,  but  deduct  it  on  the 
invoice.  Fill  out  the  envelope  as  you  did  before  except  that  after  Shipper's 
Instructions  write  Do  not  collect  charges. 

September  19.  Receive  this  check  from  D.  G.  Paxton  for  invoice  of  the 
9th,  less  discount.  Examine  his  ledger  account.  Does  he  owe  you  the 
entire  amount  of  the  invoice?  What  does  the  credit  represent?  Compute 
the  discount  on  the  amount  that  he  owes. 

Receive  this  N.  Y.  Draft  from  K.  L.  Mears  for  the  invoice  of  the 
10th,  less  discount.  Examine  his  ledger  account  carefully.  This  check 
should  pay  both  charges  to  his  account  on  September  10,  after  the  discount 
is  deducted  on  the  invoice. 

Pay  the  E.  J.  Ranney  Co.  for  invoice  of  the  11th,  less  discount. 

September  21.  The  business  has  received  several  calls  from  customers 
for  a  piano  which  they  could  sell  for  about  $275.  The  F.  G.  Smith  Piano 
Co.  has  offered  to  ship  us  pianos  to  be  sold  on  a  commission  of  12j%. 
Mr.  Martin  made  the  agreement  several  days  ago.  He  also  agreed  that 
the  firm  would  honor  their  15-day  draft  for  $1500. 

From  this  invoice  of  shipment,  make  a  record  in  the  journal  of  the 
goods  received.  Pay  the  freight  bill  by  check  and  charge  it  to  the  consign- 
ment. The  use  of  the  truck  and  the  services  of  the  driver  and  assistant 
are  worth  $12.  Make  a  journal  entry  charging  this  to  the  consignment 
and  crediting  Delivery  Expense. 

Accept  this  draft  of  the  F.  G.  Smith  Piano  Co.  for  the  account  of  the 
consignment. 

September  22.     C.  G.  Yates,  Denver,  Colo.,  orders: 
14  Mahogany  Dressers 
12  Mahogany'Rockers 
8  Oak  Davenports 
.    Terms:     account,  30  days. 

Pay  this  bill  of  the  Western  Supply  Co.  for  motor  truck  supplies. 

Deposit  all  checks  and  N.  Y.  drafts  on  hand. 

Prove  cash,  and  submit  your  cash  book  and  check  book  to  your  teacher 
for  approval. 

September  23.  Receive  this  check  from  the  express  company  for  the 
C.  O.  D.  shipment  made  by  them  on  the  18th.    The  charges  .for  collecting 


198  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

the  money,  50c,  have  been  deducted  in  accordance  with  your  instructions 
to  the  express  company. 

Make  your  entries  so  that  they  will  show  the  amount  paid  by  the 
customer  and  the  amount  allowed  by  you  to  the  express  company  for  col- 
lection. 

B.  L.  Duncer,  City,  orders: 
6  Smith  Pianos 

Terms:     account,  30  days. 

This  is  not  a  sale  of  merchandise  but  of  consigned  goods.  Bill  them 
at  $235.   • 

Where  should  the  entry  be  made?    Why? 

September  24.  Receive  the  account  sales  and  returns  from  the  D.  G. 
Luther  Co.  of  the  shipment  made  to  them  on  the  17th. 

Check  the  correctness  of  the  account  sales  and  compare  the  check 
received  with  the  net  proceeds. 

Make  an  entry  for  the  net  proceeds  only.  File  the  account  sales  in  the 
Miscellaneous  file. 

J.  A.  Reiss  &  Co.,  City,  send  this  check  to  apply  on  account,  and 
order: 

7  B.  E.  Maple  Dressers 
10  Mahogany  Chiffoniers 
6  Smith  Pianos 
Terms:     account,  10  days. 

The  pianos  are  from  the  F.  G.  Smith  &  Co.  consignment.  Bill  them 
at  $235.     Make  out  one  invoice  but  make  two  entries  for  the  sale. 

What  account  should  be  credited  for  the  pianos  sold?    Why? 
Where  should  the  entry  be  made? 

September  25.     L.  E.  Conroy,  Muncie,  Ind.,  orders: 
4  Mahogany  Chiffoniers 
12  Mahogany  Parlor  Suites 

Terms:     draft  favor  National  Exchange  Bank,  with  B/L  attached,  less 
2%. 

Treat  this  the  same  as  previous  transactions  of  this  kind.  Do  not 
deduct  the  discount. 

Receive  this  check  from  D.  C.  Scott,  on  account. 

Give  Klingman  Furniture  Co.  your  note,  payable  30  days  after  date, 
with  interest  at  6%,  for  $1000,  to  apply  on  account. 

Render  account  sales  to  the  F.  G.  Smith  Piano  Co. -for  the  pianos 
sold  on  commission.  Deduct  the  commission  in  addition  to  the  items 
already  charged. 

Make  a  journal  entry  for  the  commission.  Send  a  check  for  the  net 
proceeds  and  make  the  entry  for  it. 

When  you  have  posted  these  entries  together  with  those  already  made, 
the  charges  should  all  be  on  the  debit  side  and  the  sales  on  the  credit  side. 


JOBBING  FURNITURE  199 

Will  the  entries  you  have  made  balance  the  Consignment  account?     They 
should  if  you  have  made  no  mistakes. 

September  26.  By  agreement  with  F.  G.  Smith  Piano  Co.,  you  prepay 
your  acceptance  of  September  21,  for  $1500,  less  discount  at  6%. 

Whether  the  acceptor  of  a  draft  or  the  maker  of  a  note  is  allowed  a 
discount  for  prepayment  is  a  matter  of  agreement  as  the  note  is  usually 
written.     But  the  payee  is  usually  willing  to  allow  the  acceptor  or  maker 
the  per  cent  of  interest  that  represents  the  loan  value  of  money  at  that  time. 

You  must  make  the  entry  as  if  you  had  paid  your  acceptance  in  full 
and  had  received  back  the  discount  from  the  payee. 

September  28.  The  account  of  J.  C.  Jenkins  is  long  past  due,  and  there 
are  rumors  concerning  his  solvency.  Mr.  Martin  has  written  several  letters 
asking  for  payment  but  has  received  no  satisfactory  reply.  Draw  a  sight 
draft  on  him  for  the  amount  he  owes  and  leave  it  at  the  bank  for  collection. 

Make  no  entry,  but  make  a  memorandum  in  the  journal. 

A.  Dorris,  City,  orders: 

5  Oak  Chamber  Sets 

6  Oak  Dining  Tables 
8  Oak  Library  Tables 

Terms:     account,  30  days. 

Mr.  Martin  informs  you  that  he  has  taken  1  Mahogany  Parlor  Suite 
from  the  stock  for  his  personal  use. 

Make  a  journal  entry  for  this  as  it  is  not  really  a  sale,  but  a  deduction 
of  the  amount  of  the  purchases  left  on  hand.    Charge  it  to  him  at  cost. 

September  29.  Discount  at  National  Exchange  Bank,  C.  D.  Forester's 
note  for  $1500.     The  bank  charges  6%  discount. 

To  discount  an  interest-bearing  note: 

1.  Find  the  interest  on  the  note  for  the  full  time  expressed  in  the  note. 

2.  Find  the  amount  of  the  note  by  adding  the  interest  to  the  face  value. 

3.  Discount  the  amount  for  the  unexpired  time. 
Make  three  entries  for  this  transaction. 
September  30.     Pay  this  freight  bill. 

Give  each  proprietor  a  check  for  $75  for  personal  use. 
Pay  salaries  by  check. 

Make  a  journal  entry  to  transfer  part  of  the  Delivery  Expense  to 
Purchases  because  of  the  use  of  the  delivery  equipment  for  hauling  incom- 
ing goods  to  the  store  room.*   The  amount  to  be  transferred  is  $18.25. 

Deposit  all  checks  on  hand;  iV%  collection  on  all  out-of-town  checks 
except  express  checks. 

Fourth  Report.  Prove  cash,  make  a  report,  and  hand  in  your  Outgoing 
Papers. 


200  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

CLOSING   WORK 

Open  the  Consignment  account  on  page  18  and  the  two  new  nominal 
accounts  on  page  26. 

1.  Close  the  sales  book  and  post  it.  Do  not  forget  to  rule  each  page 
and  forward  it  in  ink  to  the  top  of  the  next  page. 

2.  Close  the  purchase  book  and  post  it. 

3.  Close  the  cash  book  and  post  it. 

4.  Post  the  journal. 

5.  Render  statements  of  accounts  to  all  customers  that  owe  you 
except  C.  O.  D.  customers.  Follow  the  model  statement  of  account  in 
Chapter  XX. 

6.  Prove  the  bill  book. 

7.  Inventories,  September  30,  19 — 

Merchandise: 

20  Brass  Bedsteads 
29  Felt  Mattresses 
46  Hair  Mattresses 
20  Mahogany  Dressing  Tables 
20  Mahogany  Lady's  Desks 
13  Mahogany  Parlor  Suites 
1  Mahogany  Parlor  Table 
15  Oak  Chamber  Sets 
24  Oak  Desk  Chairs 
6  Oak  Dining  Chairs 
1  Oak  Dining  Tables 
4  Oak  Sideboards 
13  Morris  Chairs 
13  Turkish  Rockers 
4  C.  Walnut  Chamber  Sets 
Freight  on  goods  unsold,  $97.15 
Expense,  7  tons  coal  at  $5.15 
Delivery  Equipment: 

Inventory  value,  September  1,  less  depreciation  of  2%  on 
the  original  cost 
Furniture  and  Fixtures: 

Inventory    value,    September    1,    less     depreciation    of    2% 
on  the  total  original  cost 
Real  Estate,  Cost,  less  depreciation  of  \% 
Insurance,  Unexpired  insurance  for  10  months 

8.  Take  a  trial  balance.     You  will  have  to  forward  it. 

9.  Make  Trading  and  Profit  and  Loss  statements.  You  will  have  some 
new  accounts  in  this  statement. 

10.  Make  a  statement  of  Assets  and  Liabilities,  and  a  proof. 


JOBBING  FURNITURE  201 

11.  Close  the  ledger  as  follows: 

a)  All  accounts  that  are  included  in  the  Trading  and  Profit  and 
Loss  statements 

b)  Profit  and  Loss 

c)  The  proprietors'  personal  accounts 

d)  The  proprietors'  capital  accounts 

12.  Take  a  proof  trial  balance. 

13.  Write  up  the  bank  statement. 

14.  Submit  all  of  your  books  to  your  teacher  for  approval. 

REVIEW  QUESTIONS 

1.  What  are  the  purposes  of  time  drafts? 

2.  What  is  meant  by  accepting  a  draft?     How  is  it  done? 

3.  Give  the  rules  for  three-party  time  -drafts. 

4.  What  is  the  effect  of  making  a  draft  payable  at  a  bank? 

5.  What  is  meant  by  charging  a  draft  at  the  bank?     How  is  it  done? 

6.  Give  the  rules  for  two-party  time  drafts. 

7.  Explain  the  method  of  shipping  goods  by  freight  C.  O.  D.  and  of  collecting 
the  money. 

8.  Explain  the  method  of  shipping  goods  by  express  C.  O.  D.  and  of  collecting, 
the  money. 

9.  What  is  a  credit  memorandum?    How  is  it  used? 
10-     Why  are  goods  shipped  to  be  sold  on  commission? 

11.  What  is  meant  by  an  "advance"  on  a  shipment? 

12.  Describe  an  account  sales. 
» 

13.  Give  the  rules  for  debiting  and  crediting  the  Shipment  account. 

1 4.  Give  the  rules  for  debiting  and  crediting  the  Consignment  account. 

15.  What  does  the  Shipment  account  show  in  the  statements  and  how  isit  closed? 

16.  How  do  you  discount  an  interest-bearing  note? 

17.  Name  the  accounts  that  you  have  used  that  have  nothing  but  a  nominal 
element  in  them. 

18.  Name  the  accounts  that  are  chiefly  nominal  in  character  but  that  have  a  real 
element  in  them. 

19.  Name  the  accounts  that  are  chiefly  real  in  character  but  that  have  a  nominal 
element  in  them. 

20.  Name  the  accounts  that  have  a  real  element  only. 

21.  Name  the  assets  that  are  fixed  or  permanent  in  character. 

22.  Name  the  assets  that  are  temporary,  or  that  can  be  turned  into  cash  without 
closing  up  the  business. 

23.  Analyze  the  following  accounts:   (a)  Real  Estate;   (b)  Insurance;  (c)  Interest, 
with  the  debit  side  the  larger;   (d)  Freight  In;   (e)  Delivery  Expense;   (f)  Commission. 


202  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Exercise  43.     Make  the  entries  for  each  of  the  parties  to  the  following 
transactions. 

September  8.  L.  C.  Gorley  drew  a  sight  draft  on  D.  E.  Herz,  in 
favor  of  B.  I.  Havens,  for  $850,  to  apply  on  account. 
The  draft  was  paid  when  presented. 

10.  E.  James  &  Co.  drew  a  draft  at  30  days'  sight,  on 
C.  \.  Webster,  for  an  invoice  of  goods  sold  today, 
amounting  to  $289.25.  The  draft  was  accepted 
September  13. 

12.  J.  E.  Weaver  bought  an  invoice  of  goods  of  Friend 
&  Co.,  amounting  to  $437.45.  He  sent  a  Chicago 
draft  in  payment.     Exchange,  50^. 

14.  C.  N.  Norris  drew  a  30-day  draft  on  Evarts  &  Co., 
in  his  favor,  for  $625,  to  apply  on  account.  The 
draft  was  accepted  September  16. 

18.  C.  N.  Norris  discounted  the  acceptance  of  Evarts 
&  Co.,  in  the  previous  transaction,  at  the  bank 
at  6%. 

20.  D.  E.  Hilton  drew  a  sight  draft  on  M.  E.  Morris, 
in  favor  of  G.  R.  Rhodes,  for  $250.  When  it  was 
presented  to  the  drawee,  he  refused  payment. 

22.  D.  E.  Long's  account,  amounting  to  $315.75  is  long 

past  due.  You  offered  him  a  discount  of  3% 
for  payment  at  once,  and  drew  a  sight  draft  on 
him  in  your  favor,  for  the  net  amount.  Your  bank 
reports  the  draft  paid  today.  Collection  charge, 
3(#. 

23.  L.   D.   Kohn  sold  an  invoice  of  goods  to   L.   Vogel, 

amounting  to  $242.25,  on  the  terms:  draft  with  bill 
of  lading  attached.  The  draft  with  bill  of  Jading 
attached  was  left  at  the  bank  for  collection. 

29.     The   bank   reports   this    draft    collected.      Collection 
charge,  £%. 
Make  all  the  entries  necessary  for  L.  D.  Kohn  for  both  dates. 

29..  M.  E.  Doyle  drew  a  sight  draft  on  Stover  &  Co., 
for  $750,  on  account  of  a  shipment  of  goods  sent 
to  them  to  be  sold  on  commission.  The  bank 
reports  the  draft  paid.     Collection  charge,  -fa  %• 

29.  W.  A.  Warner  accepted  Page  &  Co.'s  draft  at  15 
days'  sight,  for  invoice  of  the  23d,  less  2%  discount. 
Amount  of  invoice,  $536.40. 


JOBBING  FURNITURE  203 

Exercise  44.  a)  Make  the  entries  for  the  following  transactions,  in  journal 
form. 

May       2.     Paid  freight  on  goods  bought,  $37.25. 
5.     Paid  for  packing  material,   $28.95. 

8.     Gave  J.  Cole  a  credit  memorandum  for  goods  returned, 
$18.45. 
10.     Paid    merchandise    broker's    commission    on    goods    pur- 
chased, $47.50. 
12.     Received    a    credit    memorandum    from    Turner    &    Co. 

for    overcharge,    $16.80. 
14.     The   proprietor   took   goods   from    stock   for    his    private 

use,  $7.50. 
18.     Shipped  goods  at  cost,  to  C.  L.   Roberts,  to  be  sold  on 

commission,  $728.45. 
20.     Gave  T.  M.  Masters  a  credit  memorandum  for  damaged 

goods,  $19.50. 
22.     Paid  freight  on  goods  bought,  $56.45. 
24.     Took  goods  from  stock  for  repairs  to  a  building  owned  by 

the  business,  $3.15. 
26.     Received  a  credit  memorandum  from  D.   Vinton  &  Co. 

for   goods   returned,    $15.45. 
28.     Received  a  cash  rebate  of  $12.30  for  an   overcharge  on 
freight  paid. 

30.  Paid  salary  of  receiving  clerk,  $45. 

31.  The  purchases  for  the  month  amounted  to  $6725.80. 
31.     The  sales  for  the  month  amounted  to  $5025.75. 

b)  Open  the  trading  accounts,  enter  the  inventory,  May  1,  $2123.40, 
and  post. 

c)  Make  a  trading  statement.     Inventory,  May  31,  $1985.65. 

d)  Close  the  trading  accounts. 

Exercise  45.     Make  entries  for  the  following  transactions  in  journal 
form,  and  show  the  property  and  nominal  accounts  closed. 

October  1.  Bought  the  building  and  lot  at  210  Second  St.  of  Caspar 
&  Co.  for  $12,500.  Paid  them  cash,  $5000  and  gave 
a  note,  payable  one  year  after  date,  with  interest  at 
6%,  for  the  balance. 

5.  Paid  for  alterations  to  make  the  building  suitable  for 

the  owner's  business,  $97.85. 

6.  Leased  two  rooms  in  the  building  to  G.  D.  Easton  for  a 

monthly  rental   of   $45.      Received   payment   of   the 

October  rent. 
8.     Paid  for  repairs  to  the  building,  $13.75. 
10.     Paid  for  a  covered  loading  platform  attached  to  the  rear 

of  the  building,  $240. 
12.     Paid  the  taxes  on  the  building  and  lot,  $72.85. 


204  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

18.     Paid  the  city  assessment  on  the  building  and  lot,  $27.35. 
22.     Tore  up  a  board  sidewalk  around  the  building  valued 

at  $65,  and  put  in  a  cement  walk  costing  $212.     Paid 

cash  for  the  new  walk. 

26.     Sold  the  building  and  lot  to  D.  E.   Jansen  for  $13500. 
He  paid  cash  $7500,  and  gave  his  note  for  the  balance, 
payable   30    days   after   date,    with   interest   at   6%. 
Before  making  this  entry,  post  the  previous  entries. 

28.     Paid  our  note  with  interest,  favor   Caspar   &   Co.,   for 
$7500,  less  discount  at  6%. 
Exercise  46.   a)     Make  the  entries  in  journal  form,  for  the  following 
transactions. 

June       1.     Paid  for  a  delivery  wagon,  $85. 

3.  Paid  for  two  horses,  at  $135  each,  $270. 

4.  Paid  stable  rent  for  June,  $8. 

5.  Paid  for  hay  and  straw,  $27.50. 

7.     Paid  for  a  set  of  double  harness,  $25. 

9.  Paid  for  horse  shoeing,  $2.50. 
12.  Paid  for  corn  and  oats,  $9.80. 
15.     Received    from    C.    D.    Brake,    $6.50    for    doing    hauling 

for  him. 
18.     Sold  one  horse  for  cash,  $120. 

Make  the  entry  so  that  the  asset  account  will  show  the  correct  value  of  the  assets  remaining. 

20.     Paid  for  another  horse,  $150. 
24.     Paid  for  a  top  for  the  delivery  wagon,  $20. 
26.     Paid  for  repairs  to  the  wagon,  $3.75. 
b)     Close  Delivery  Equipment  and  Delivery  Expense. 
Inventories: 

Horses,  wagons,  and  harness  at  cost,  less  1  %  depreciation 
Feed  on  hand  valued  at  $14.25 

Exercise  47.  a)   Make  the  entries  for  the  consignor  and  for  the  con- 
signee. 
January     8.     E.  B.  Hamilton  &  Co.,  Toledo,  Ohio,  shipped  to  C.  L. 
Patton,  at  cost,  to  be  sold  on  commission,  the  following: 
15  tubs  Butter,  60  lb.  each,  at  24^  per  lb. 
35  cases  Eggs,  36  doz.  each,  at  19^  per  doz. 
12.     C.  L.  Patton  received  these  goods  from  E.  B.  Hamilton 

&  Co.,  and  paid  freight  $9.25  and  drayage,  $2.75. 
15.     Sold  for  cash  to  D.  Bender: 

8  tubs  Butter  at  30^  per  lb. 

15  cases  Eggs  at  25^  per  doz. 

17.     Sold  C.  Elliot  &  Co.,  on  account: 

7  tubs  Butter  at  30j^  per  lb. 

12  cases  Eggs  at  26^  per  doz. 


JOBBING  FURNITURE  205 

18.  E.  B.  Hamilton  &  Co.  drew  at  sight  on  C.  L.  Patton 
for  $200,  on  account  of  the  shipment,  which  C.  L. 
Patton  paid  today. 

20.  C.  Elliot  &  Co.  returned  1  tub  Butter  to  C.  L.  Patton 
as  unsatisfactory.     Gave  them  a  credit  memorandum. 

22.  Sold  J.  Colby  on  account: 

8  cases  Eggs  at  25i^  per  doz. 

23.  Sold  the  1  tub  of  Butter  returned  at  15^  per  lb.  to  D. 

Kemp,  for  cash. 

b)  Open  ledger  accounts  for  the  shipment  and  for  the  consignment,  and 
post  the  entries  to  these  accounts. 

c)  January  24.  Render  account  sales  for  C.  L.  Patton.  The  additional 
charges  are:  storage,  $12.50;  commission,  5%.  Remit  the  net  proceeds 
in  cash. 

d)  Make  the  additional  entries,  and  show  the  Shipment  and  Con- 
signment accounts  closed. 

Exercise  48.  Enter  the  following  in  an  Insurance  account,  find  the 
inventory,  and  close  the  account,  September  30. 

July  1.  Insured  a  stock  of  goods  for  $5000  for  one  year.  Paid  the 
premium  at  the  rate  of  80^  per  $100. 

August  1.  Took  out  additional  insurance,  amounting  to  $1500.  Paid 
the  premium  for  one  year  at  lj  %. 

August  15.  Took  out  additional  insurance,  amounting  to  $2500. 
Paid  the  premium  for  one  year  at  $1.15  per  $100. 

In  finding  the  unexpired  insurance  value,  count  the  time  in  months.  For  a  fractional  part  of  a  month 
consider  30  days  to  the  month. 

Exercise  49.  J.  C.  Sullivan  began  business  March  1,  with  the  follow- 
ing investment  of  assets  and  liabilities.     Make  the  opening  entry. 

Cash,  $2500 

Stock  of  goods,  $2600 

Chas.  Orton's  60-day  note,  dated  February  3,  for  $650 

James  Aldrich's  30-day  note,  dated  February  8,  with  interest  at  6%, 
for  $425 

Real  estate,  valued  at  $6000 

Rent,  due  from  subrentals,  $45 

Furniture  and  fixtures,  valued  at  $460 

J.  C.  Steele  owes  him  on  account,  $986.40. 

He  owes  D.  J.  Perry  on  account,  $1250. 

He  owes  E.  J.  Black  a  note  for  $2000,  dated  January  10,  payable  six 
months  after  date,  with  interest  at  6%,  as  part  payment  on  the  real  estate 
bought. 


206 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Exercise  50.  From  the  following  trial  balance  and  inventories, 
prepare  Trading  and  Profit  and  Loss  statements  and  a  Statement  of  Assets 
and  Liabilities.  The  statements  cover  a  period  of  six  months,  ending 
December  31,  1910. 

This  problem  is  taken  from  the  New  York  state  examination  in  elementary  bookkeeping. 

Trial  Balance,  December  31,  1910. 

J.  A.  Finch,  Partner 

L.  A.  Lewis,  Partner 

Furniture  and  Fixtures 

Real  Estate 

Horse  and  Wagon 

Office  Supplies 

Mdse.  Discount 

Shipment,  Davis  &  Co. 

Purchases 

Sales 

Freight  In 

Gray  &  Co. 

Notes  Receivable 

Expense 

Holmes  &  Co. 

Commission 

Notes  Payable 

Cash 

37735       37735 


100 

9000 

200 

9000 

350 

14000 

500 

90 

110 

1800 

950 

11375 

215 

310 

7520 

75 

1125 

600 

2000 

1100 

150 

600 

3100 

250 

2000 

6000 

2950 

Inventories: 
Merchandise,  $6625 
Office  Supplies,  $40 
Insurance,  unexpired,  $20 
Shipment,  unsold,  $1115 
Depreciation: 
Real  Estate,  2\  % 
Horse  and  Wagon,  12£% 
Furniture  and  Fixtures,  5  % 


SUMMARY  OF  PRINCIPLES  AND  RULES 


An  Entry  is  a  systematic  record  of  a  transaction. 

The  Journal  is  a  book  of  entry  in  which  transactions  are  entered  as 
they  occur  with  a  debit  for  every  credit  or  one  or  more  debits  that  are 
equal  to  one  or  more  credits. 

The  Ledger  is  a  book  in  which  the  items  from  the  original  books  of 
entry  are  classified  under  appropriate  headings  called  accounts. 

Posting  is  transferring  the  debits  and  credits  from  the  books  of  entry 
under  the  proper  headings  in  the  ledger. 

A  Trial  Balance  is  a  list  of  the  open  accounts  in  a  ledger  with  the 
debit  and  credit  footings,  or  the  balances  set  opposite  the  names  of  the 
accounts,  and  with  the  total  debits  and  credits  equal. 

Real  Accounts  are  accounts  that  represent  actual  values. 

Nominal  Accounts  are  accounts  that  name  some  profit  or  loss  of  the 
business. 

Mixed  Accounts  are  accounts  that  contain  both  real  and  nominal  ele- 
ments. 

An  Asset  is  property  belonging  to  the  business  or  an  amount  owed  to 
the  business. 

A  Liability  is  an  amount  owed  by  the  business,  whether  due  or  not. 

A  Note  Receivable  is  another's  note  given  to  the  business. 

A  Note  Payable  is  a  note  given  by  the  business. 

A  Statement  of  Profit  and  Loss  shows  in  detail  the  profits  and  losses 
of  the  business  and  the  net  profit  or  loss  of  each  proprietor. 

A  Statement  of  Assets  and  Liabilities  exhibits  in  detail  the  assets  and 
liabilities  of  the  business  and  the  net  worth  of  each  proprietor. 

Rule  of  Double  Entry.  Equal  debits  and  credits  must  result  from 
each  transaction. 

General  Rule  of  Debits  and  Credits.  Debit  what  the  business  receives 
or  the  account  that  receives  the  benefit. 

Credit  what  the  business  parts  with  or  the  account  that  yields  the 
benefit. 

Rule  for  Creditors'  Accounts.  Credit  a  creditor's  account  when  the 
business  becomes  indebted  to  him.      Debit  a  creditor's  account  when  the 

207 


208  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

business  pays  the  creditor  on  account,  or  is  allowed  something  for  returned 
or  damaged  goods. 

Rule  for  Customers'  Accounts.  Debit  a  customer's  account  when  he 
becomes  indebted  to  the  business.  Credit  a  customer's  account  when  he 
makes  a  payment  on  account  or  is  gi\  en  an  allowance  for  returned  or 
damaged  goods. 

Rule  for  Real  Accounts.  Real  accounts  with  the  debit  side  the  larger 
are  Assets;   with  the  credit  side  the  larger,  are  Liabilities. 

Rule  for  Nominal  Accounts.  A  nominal  account  shows  a  loss  if  the 
debit  side  is  the  larger  and  a  profit  if  the  credit  side  is  the  larger. 

To  Find  the  Profit  or  Loss  on  Merchandise.  1.  Subtract  the  inven- 
tory from  the  debit  side.  Take  the  difference  between  the  credit  side  and 
this  result.  If  it  is  a  debit  difference,  it  is  a  loss.  If  a  credit  difference, 
it  is  a  profit. 

2.  Add  the  inventory  to  the  credit  side.  Take  the  difference  between 
this  result  and  the  debit  side.  If  it  is  a  debit  difference,  it  is  a  loss.  If  a 
credit  difference,  it  is  a  profit. 

To  Find  the  Net  Worth.  1.  Add  the  net  profit  to  the  net  credit  or 
subtract  the  net  loss  from  the  net  credit. 

2.    Subtract  the  liabilities  from  the  assets. 

Rule  for  Transferring  Red  Ink  Entries.  1.  Everything  in  red  ink  to 
close  must  be  brought  down  in  black  ink  on  the  opposite  side  of  the  ledger. 

2.  Inventories,  balances,  and  net  worth  are  transferred  to  the  oppo- 
site side  of  the  same  account. 

3.  Profit  and  Loss  items,  including  net  profit  or  net  loss,  must  be 
transferred  to  the  opposite  side  of  some  other  account. 

Rule  For  Notes  Receivable.  Debit  Notes  Receivable  at  the  face 
value  for  all  notes  of  others  received  by  the  business.  Credit  Notes  Receiv- 
able at  the  face  value  for  all  notes  of  others  paid  by  them  and  for  all  notes 
of  others  parted  with  in  any  other  way. 

Rule  For  Notes  Payable.  Debit  Notes  Payable  when  our  notes  are 
paid  by  the  business.      Credit  Notes  Payable  when  our  notes  are  issued. 

Rule  For  Interest.  Debit  Interest  when  the  business  allows  it  to 
others.      Credit  Interest  when  others  allow  it  to  the  business. 

Rule  For  Discount  on  Notes.  Debit  Interest  for  all  discount  allowed 
by  the  business  on  our  notes  or  on  others'  notes.  Credit  Interest  for  all 
discount  allowed  to  the  business  on  our  notes  or  on  others'  notes. 

Rule  For  Merchandise  Discount.  Debit  Merchandise  Discount  for 
all  discount  allowed  to  others  on  invoices  of  merchandise.  Credit  Merchandise 
Discount  for  all  discount  allowed  to  the  business  on  invoices  of  merchan- 
dise. 


PART  III 


INTRODUCTION 


The  work  of  Part  III  presupposes  the  completion  of  the  elementary 
work  in  bookkeeping  such  as  that  presented  in  Parts  I  and  II  of  this 
system  or  in  the  work  of  any  other  system  that  has  developed  the  use 
of  the  journal,  the  cash  book,  the  sales  book,  and  the  purchase  book 
or  invoice  book  as  books  of  entry,  and  the  ledger.  It  presupposes  a 
knowledge  of  the  ordinary  business  papers  and  their  use. 

The  mechanical  features  of  the  work  must  not  be  neglected.  The 
habits  of  neatness,  carefulness,  and  accuracy  that  were  learned  in  the 
beginning  work  must  be  continued.  Pupils  must  not  be  allowed  to 
neglect  these  things.  They  should  become  a  part  of  each  pupil.  The 
proper  study  of  bookkeeping  should  develop  system  and  a  pride  in  doing 
the  work  of  the  bookkeeper  as  it  should  be  done  in  an  office. 

But  of  even  more  importance  is  the  training  the  pupil  should 
receive  in  the  work  of  reasoning  and  analyzing.  The  plan  of  this  text 
is  to  develop  this  power  so  that  the  pupil  may  acquire  the  power  to 
become  more  than  a  routine  bookkeeper.  For  this  reason,  new  features 
of  the  work  are  fully  presented  and  exercises  given  to  develop  his 
understanding  of  the  subject.  When  these  new  features  are  presented 
in  the  sets,  little  explanation  is  given,  so  as  to  require  the  pupil  to 
analyze  the  transaction  and  to  relate  it  to  the  knowledge  that  he  al- 
ready has. 

He  is  taught  to  keep  his  records  and  entries  in  such  a  way  that 
they  will  give  him  the  necessary  information  when  wanted.  He  is 
taught  different  labor-saving  devices  and  modern  methods  of  handling 
sales,  vouchers,  etc.  He  is  given  a  larger  number  of  transactions  for 
each  financial  period  than  in  the  elementary  work  so  that  the  work  of 
proving  cash,  of  taking  a  trial  balance,  and  of  making  statements  may 
be   more  like  actual  business. 

To  help  the  pupil  to  analyze  and  to  think  many  exercises  are 
given.  Most  of  these  help  in  the  gradual  development  of  the  subject 
but  some  may  be  omitted  without  destroying  the  plan  of  the  work. 
In  addition  to  these  a  number  of  questions  and  problems  that  are  not 

209 


210  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

answered  in  the  text  are  given  to  stimulate  thought  and  to  develop 
originality. 

The  pupil  should  understand  that  in  the  study  of  advanced  book- 
keeping he  is  studying  modern  office  methods  and  systems  and  the 
elementary  principles  of  accounting.  He  should  be  encouraged  to  bring 
to  class  other  forms  and  methods  suitable  for  different  kinds  of  busi- 
ness. The  pupil  should  understand  that  although  the  principles  of 
bookkeeping  and  accounting  are  well  established,  he  must  learn  to 
apply  them  to   different  systems   and   to   different   businesses. 

The  practice  of  reasoning  out  every  transaction  that  is  different 
and  of  analyzing  the  results  of  his  work  will  help  to  give  him  the 
power  to  understand  other  systems  and  to  adapt  his  knowledge  to  them. 


CHAPTER  XXV 
CONTROLLING  ACCOUNTS  AND  COLUMNAR  BOOKS 


In  any  business  of  considerable  size  with  numerous  customers  and 
creditors,  the  taking  of  a  trial  balance  is  a  difficult  task  if  the  accounts 
are  all  kept  in  one  ledger.  To  make  the  work  of  the  bookkeeper  easier 
and  to  give  more  classified  information,  three  ledgers  are  used  instead  of 
one  and  columnar  cash  books  and  journals  are  used.  The  use  of  columnar 
books  is  largely  a  result  of  the  use  of  three  separate  ledgers  but  is  also  the 
result  of  a  desire  to  post  fewer  items  and  to  post  more  in  total. 

The  three  ledgers  used  are  the  general  ledger,  the  sales  ledger,  and  the 
purchase  ledger. 

The  General  Ledger.  The  general  ledger  contains  accounts  with 
the  proprietors,  both  capital  and  personal,  all  other  real  accounts  except 
customers'  and  creditors'  accounts,  all  mixed  accounts,  and  all  nominal 
accounts.  The  customers'  accounts  are  represented  in  total  by  the 
Accounts  Receivable  account  and  the  creditors'  accounts  are  represented 
in  total  by  the  Accounts  Payable  account. 

The  Sales  Ledger.  The  sales  ledger  contains  all  the  accounts  with 
customers  whether  the  account  is  opened  with  the  customer  or  included 
under  the  C.   O.   D.  account. 

The  Purchase  Ledger.  The  purchase  ledger  contains  all  accounts 
with  creditors  for  goods  bought. 

Advantages  of  Three  Ledgers.  The  principal  advantages  of  the 
use  of  three  ledgers  are  as  follows: 

1.  It  makes  it  possible  to  prove  up  each  ledger  and  ascertain  its 
correctness  separately. 

2.  The  work  of  posting,  checking,  and  proving  the  posting  may  be 
divided  up. 

3.  The  proprietor  can  quickly  find  out  from  the  Accounts  Receiva- 
ble account  at  the  end  of  each  month  how  much  customers  owe  him  in 
total.  He  can  find  out  from  the  Accounts  Payable  account  how  much 
the  business  owes  creditors  in  total. 

4.  '  Loose-leaf  ledgers  may  be  used  for  both  customers'  and  credi- 
tors' accounts.  This  is  a  decided  advantage  because  as  soon  as  an 
account  becomes  inactive  and  is  closed,  the  sheet  on  which  the  account 

211 


212 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


is  kept  may  be  removed  from  the  sales  ledger  or  the  purchase  ledger 
and  put  into  a  transfer  binder. 

Accounts  Receivable  Account.  In  order  to  prove  the  sales  ledger 
it  is  necessary  to  keep,  in  the  general  ledger,  an  account  to  which  the 
totals  of  the  different  items  that  have  been  posted  to  the  customers'  ac- 
counts must  be  posted.  This  account  is  called  Accounts  Receivable.  It  is 
called  a  controlling  account  because  it  controls  or  proves  the  sales  ledger. 

Accounts  Payable  Account.  In  order  to  prove  the  purchase  ledger, 
it  is  necessary  to  keep,  in  the  general  ledger,  an  account  to  which  the 
totals  of  the  different  items  that  have  been  posted  to  the  creditors' 
accounts  must  be  posted.  This  account  to  which  totals  are  posted  is 
the  Accounts  Payable  account.  It  controls  or  proves  the  purchase  ledger. 

In  order  to  post  totals  to  these  controlling  accounts  in  the  general 
ledger,  it  is  necessary  to  keep  special  columns  in  the  journal  and  in  the 
cash  book  for  sales  ledger  and  purchase  ledger  accounts.  It  is  also  nec- 
essary to  post  the  other  books  of  entry  in  a  different  way. 

Books  of  Entry.  The  books  of  entry  most  commonly  used  with 
the  three  ledgers  are  the  purchase  book  or  the  invoice  book,  the  sales 
book,  the  four-column  journal,  and  the  columnar  cash  book.  The  purchase 
book  will  be  used  instead  of  the  invoice  book. 

The  Purchase  Book.  The  purchase  book  will  be  used  in  the  same 
way  that  it  has  been  for  all  purchases  of  merchandise  and  for  all  memo- 
randums of  payments  on  these  purchases.  All  accounts  of  creditors  will 
be  opened  up  in  the  purchase  ledger.  The  entries  must  be  posted  daily 
to  the  credit  of  the  respective  personal  accounts  in  the  purchase  ledger. 

At  the  end  of  the  month,  the  total  purchases  must  be  posted  to 
the  debit  of  Purchases,  as  heretofore,  and  to  the  credit  of  Accounts 
Payable.  The  posting  of  the  total  to  Accounts  Payable  credit  is  neces- 
sary in  order  to  prove  up-  the  purchase  ledger  with  its  controlling 
account,  Accounts  Payable.  This  total  credit  in  the  general  ledger 
takes  the  place  of  the  items  that  have  been  posted  to  the  credit  of  the 
respective  creditors'  accounts  in  the  purchase  ledger. 

Close  the  purchase  book  as  follows: 


31 

12 

8 

Total  Purchases 

Purchases 

To  Account 


s  Payable 


$8375.80 


8375 


8375 


80 
80 


The  Sales  Book.  The  sales  book  for  the  first  set  in  Part  III  will 
not  be  a  bound  book,  but  will  be  made  up  of  the  order  blanks  placed 
in  a  binder  and  totaled  on  a  special  sheet.  The  method  of  doing  this 
will  be  explained  in  the  next  chapter. 


CONTROLLING  ACCOUNTS  AND  COLUMNAR  BOOKS  213 

The  Cash  Book.  On  the  Cash  Receipts  side,  columns  are  kept  for 
the  amounts  of  accounts  that  are  to  be  posted  to  the  general  ledger, 
for  those  that  are  to  be  posted  to  the  sales  ledger,  and  columns  for 
Sales  Discount  and  for  Cash  Dr.  In  the  General  column  is  placed  any 
amount  that  is  to  be  posted  to  the  general  ledger.  In  the  Accounts 
Receivable  column  is  placed  any  amount  that  is  to  be  posted  to  a 
customer's  account  in  the  sales  ledger.  If  cash  is  received  for  a  cus- 
tomer's account  less  discount,  the  amount  of  the  account  before  the 
discount  is  deducted  is  placed  in  the  Accounts  Receivable  column,  the 
discount  is  placed  in  the  Sales  Discount  column,  and  the  cash  received, 
in  the  Cash  Dr.  column. 

Monthly,  the  total  of  the  Accounts  Receivable  column  is  posted 
to  the  credit  of  the  Accounts  Receivable  account  in  the  general  ledger 
to  represent  the  various  items  that  have  been  posted  to  customers' 
accounts  in  the  sales  ledger. 

Sales  Discount  must  be  debited  monthly  for  the  total  of  the  Sales 
Discount  column.  The  principle  is  the  same  as  in  previous  sets  but  it  is 
considered  advisable  at  this  point  to  open  up  separate  discount  accounts 
for  sales  and  for  purchases. 

On  the  Cash  Payments  side,  columns  are  kept  for  the  amounts  of 
accounts  that  are  to  be  posted  to  the  general  ledger,  for  those  that  are 
to  be  posted  to  the  purchase  ledger,  for  Purchases  Discount,  and  for 
Cash  Cr.  Two  columns  are  kept  for  general  ledger  accounts,  the  General 
and  the  Expense.  All  amounts  that  are  to  be  posted  to  accounts  in 
the  general  ledger,  except  Expense,  are  placed  in  the  General  column. 
All  Expense  items  are  placed  in  the  Expense  column  and  posted  monthly 
only.  Check,  in  the  folio  column,  all  items  entered  in  the  Expense 
column.  In  the  Accounts  Payable  column  is  placed  any  amount  that 
is  to  be  posted  to  the  debit  of  an  account  in  the  purchase  ledger.  The 
payment  of  an  account  less  discount  is  entered  on  the  same  principle 
as  the  entry  for  the  receipt  of  cash  for  an  account  less  discount. 

Monthly,  the  total  of  the  Accounts  Payable  column  is  posted  to 
the  debit  of  the  Accounts  Payable  account  in  the  general  ledger  to 
represent  the  various  items  that  have  been  posted  to  the  debit  of 
creditors'  accounts  in  the  purchase  ledger. 

Purchases  Discount  must  be  credited  monthly  for  the  total  of  the 
Purchases  Discount  column. 

In  closing  the  cash  book,  the  sum  of  the  first  two  columns  on  the 
Cash  Receipts  side  must  be  proved  with  the  sum  of  the  last  two  col- 
umns, and  the  accounts  affected  shown.  On  the  Cash  Payments,  the 
sum  of  the  first  three  columns  must  be  proved  with  the  sum  of  the 
last  two  columns,  and  the  accounts  affected  must  be  shown.  The  cash 
book  must  then  be  balanced  by  using  the  amount  of  the  Cash  Dr.  and 


214 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Cash  Cr.  columns  only.  To  prove  cash,  at  any  time,  take  the  difference 
between  these  two  columns. 

The  cash  book  illustrated  is  shown  without  the  pages  in  the  folio 
column.     These  should  be  inserted  as  each  item  is  posted. 

The  Journal.  Separate  columns  must  be  kept  in  the  journal  for 
each  ledger  to  which  items  will  be  debited  or  credited.  On  the  debit 
side,  there  must  be  columns  for  the  general  ledger  and  for  the  purchase 
ledger.  No  debit  column  for  the  sales  ledger  is  necessary  as  the  business 
does  not  give  notes  or  drafts  to  customers  on  account,  hence  there  will 
ordinarily  be  no  debits  to  the  sales  ledger  from  the  journal. 

On  the  credit  side,  there  must  be  columns  for  the  general  ledger 
and  for  the  sales  ledger.  No  credit  column  for  the  purchase  ledger  is 
necessary.     (See  illustration  on  page  216) 

It  is  necessary  to  post  the  totals  of  the  Accounts  Payable  and 
Accounts  Receivable  columns  only  as  the  items  in  the  General  columns, 
both  debit  and  credit,  have  been  posted  to  the  general  ledger  daily. 

Cash  Receipts,  October  19— 


ACCOUNT 


EXPLANATION 


ACCTS. 
RECEIV. 


SALES 
DISC. 


CASH 
DR. 


Oct. 


Nov 


Balance 

C.  L.  Darst 

D.  E.  Hillis 
Notes  Receivable 
J.  C.  Ellis 

C.  L.  Greene  &  Co. 
Notes  Receivable 
Interest 

D.  E.  Jobse  &  Co. 
Notes  Receivable 
N.  O.  Merrin 

L.  E.  Lindsay- 
Notes  Payable 
D.  J.  Short  &  Co. 
C.  D.  Curtiss 


General 

Accts.  Receivable  Cr. 
Sales  Disc.  Dr. 
Cash  Dr. 


On  hand 

Inv.  of  9/28,  less  2% 

Sgt.  dft.  on  acct. 

J.  A.  Trent's  note 

On  acct. 

Inv.  of  10/2,  less  2% 

C.  L.  Fenn's  note 

30  da.  on  above 

Inv.  of  10/11,  less  3% 

C.  L.  Speich's  note 

Sgt.  dft.  for  inv.  9/20 

Inv.  of  10/16,  less  1% 

Our  60-da.  note 

Inv.  of  10/22,  less  2% 

Inv.  of  9/31 

Total 


15 


8756 
750 


1200— 
6 


1037 
1000 


1274965 


1274965 
630295 


19052 


60 


31 


Total  Receipts 


Balance 


In  bank 


2130 


50 


787 
235 


500 
56025 


89780 

171525 
41640 


575 
615 


630295 


75 


15 


11 


2693 


50 


6956 


70 


20 


875615 
77199 
235— 
750— 
500— 
54905 

1200— 

6— 

87087 


1037 


171525 
41224 

1000- 
56399 
615 


18983  Q4 


69 


1898304 


19052 


1898304 


18983 


21301— 


50 


56 


80 


01 


CONTROLLING  ACCOUNTS  AND  COLUMNAR  BOOKS 


215 


Returns  and  Allowances  on  Sales.  A  separate  book  of  entry  will 
be  kept  for  returns  and  allowances  on  sales.  In  it  should  be  entered 
all  returned  goods,  rebates,  and  allowances  that  are  to  be  credited  to 
customers'  accounts.  Daily  it  will  be  posted  to  the  credit  of  the  cus- 
tomers' accounts  affected.  It  is  best  to  write  an  explanation  in  the 
customer's  account  in  the  ledger  so  as  to  show  the  nature  of  the  credit. 
Monthly,  the  total  should  be  posted  to  the  debit  of  Returns  and  Allow- 
ances on  Sales  and  to  the  credit  of  Accounts  Receivable,  the  closing 
entry  would  be  as  follows: 

Returns  and  Allowances  on  Sales        $57.50 

To  Accounts  Receivable  $57.50 

Returns  and  Allowances  on  Purchases.  In  the  same  way,  a  separate 
book  will  be  kept  for  returns  and  allowances  on  purchases.  Daily  it 
will  be  posted  to  the  debit  of  the  creditors'  accounts  affected.  An 
explanation  should  also  be  written  in  the  explanatory  column  of  the 
ledger   account.     Monthly,    the   total   should   be   posted   to   the  debit  of 

Cash  Payments,  October  19— 


ACCTS. 

PUR. 

CASH 

DATE 

r 

ACCOUNT 

EXPLANATION 

GENERAL 

EXP. 

PAYABLE 

DISC. 

CR. 

Oct. 

3 

5 
5 

7 

8 

9 

10 

V 
V 

Furniture  &  Fixtures 

Expense 

Collection  &  Ex. 

C.  D.  Bender 

Interest 

J.  A.  Bauer  &  Co. 

Expense 

Bill  of  West  Co. 

Stationery 

On  dft.  on  D.  E.  Hillis 

Inv.  of  10/8 

36  da.  disc,  Trent's  note 

Inv.  of  9/30,  less  2% 

Stamps 

125 

4 

80 
25 
50 

7 
6 

45 

983 

1728 

40 
65 

34 

57 

125 

7 

983 

4 

1694 

6 

80 
45 
25 
40 
50 
08 

10 

D.  C.  Gibson  &  Co. 

Inv.  of  9/30,  less  2% 

1436 

20 

28 

72 

1407 

48 

12 

Delivery  Expense 

Repairs  to  truck 

18 

25 

18 

25 

13 

Freight  In 

C.  &  N.  W.  R.  R.  Co. 

78 

90 

78 

90 

15 

Salaries 

For  one-half  month 

275 

— 

275 

— 

16 

Interest 

30  da.  disc,  Fenn's  note 

6 

03 

6 

03 

17 

Notes  Payable 

Favor  N.  E.  Bank 

1500 

— 

1500 

— 

17 

Interest 

30  da.  on  above 

7 

50 

7 

60 

19 

V 

Expense 

Office  supplies 

2 

45 

2 

45 

20 

G.  L.  Harris 

Inv.  of  10/10,  less  2% 

786 

40 

15 

73 

770 

67 

21 

Freight  Out 

C.  M.  &  St.  P.  R.  R. 

35 

85 

35 

85 

23 

Collection  &  Ex. 

On  C.  L.  S.'s  note 

1 

— 

1 

— 

24 

V 

Expense 

5  T  Coal  at  $4.90 

24 

50 

24 

60 

26 

D.  L.  Ban- 

Inv.  of  10/16,  less  3% 

1037 

25 

31 

12 

1006 

13 

27 

Interest 

60  da.  disc,  our  note 

10 

— 

10 

— 

28 

Real  Estate 

975  12th  St. 

8500 

— 

8500 

— 

30 

Freight  In 

C.  &  N.  W.  R.  R.  Co. 

112 

80 

112 

SO 

30 
31 

V 

Salaries 
General 

One-half  month 
Total 

275 

— 

275 

— 

10950 

88 

40 

40 

5971 

90 

110 

14 

16853 

04 

10950 

88 

31 

Expense  Dr. 

« 

40 

40 

. 

31 

Accts.  Payable  Dr. 

a 

5971 

90 

31 

Purchases  Disc.  Cr. 

a 

11014 

31 
31 

V 

Cash  Cr. 
Total  Payments 

a 

1685304 

16963 

18 

16963|18 

1685304 

81 

Balance 

In  bank 

2  ISO 

— 

18983 

04 

== 

216 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 
Four-Column  Journal,  October  26,  19 — 


ACCOUNTS 
PAYABLE 

GENERAL 

F 

F 

GENERAL 

accounts 
rec'ble 

1375 
250 

20 

2867 

476 

45 
80 

5 
15 

Forward 

Notes  Receivable 
To  H.  G.  Eckhardt 

His  note  at  30  da.  on  acct. 
27 
C.  L.  Stone  &  Co. 
To  H.  L.  Gardner 

Drew  a  sight  draft  and  remitted  it  on 

12 
13 

2341 

20 

1901 
476 

250 

45 
80 

450 

— 

16 

V 
7 

acct. 

28 
B.  C.  Harmon 
To  Notes  Payable 

Gave  note  at  30  da.  with  int.  at  6% 
on  acct. 

General 

Accounts  Pay.  Dr. 
Accounts  Rec.  Cr. 

8 

V 
6 

450 

— 

2075 

20 

3344 

25 

2791 

20 

2628 

25 

3344 
2075 

25 
20 

2791 
2628 

20 
25 

5419 

45 

5419 

45 

Accounts    Payable    and    to    the    credit    of    Returns    and   Allowances  on 
Purchases. 

Accounts  Payable  Account.  After  posting  the  totals  from  the  books 
of  entry  to  the  controlling  account  of  Accounts  Payable,  the  account 
should  contain  the  items  shown  in  the  following  account,  with  a  balance 
from  the  previous  month. 


19— 


Accounts  Payable 
19— 


Oct. 


C 

J 

R.&  Al. 

Balance 


15 

8926 

95 

Oct. 

1 

7 

3217 

45 

31 

1 

78 

5267 

90 

20 

17490 

50 

Nov. 

1 

Balance 


Balance 


7315 
10175 


17490 


5267 


20 
30 


50 
20 


Accounts  Receivable  Account.  After  posting  the  totals  from  the 
books  of  entry  to  the  controlling  account  of  Accounts  Receivable,  the 
account  should  contain  the  items  shown  in  the  account,  with  a  balance 
from  the  previous  month.     (See  illustration  on  page  217) 

Purchase  Ledger  Proof.  To  prove  the  purchase  ledger,  list  the 
balance  of  the  creditors'  accounts  by  names  and  amounts.  The  sum  of 
these  balances  should  equal  the  balance  of  the  Accounts  Payable  account 
in  the  general  ledger. 


CONTROLLING  ACCOUNTS  AND  COLUMNAR  BOOKS 


217 


19— 


Accounts  Receivable 
19— 


Oct. 

1 
31 

Nov. 

1 

Balance 


Balance 


3171 

40 

Oct. 

31 

12 

8976 

80 

31 
31 

=T 

31 

12148 

20 

4488 

65 

R. 

Balance 


C 
J 

&A1. 


5316 

2275 

67 

U88 


12148 


80 
50 
25 
65 
20 


Purchase  Ledger  Proof,  October  31,  19- 

3 

Karger  &  Co. 

386 

90 

4 

F.  Paul 

1247 

80 

5 

H.  Owen  &  Co. 

3896 

55 

6 

E.  B.  Buckland 

976 

45 

6 

C.  Offman  &  Co. 

1652 

80 

8 

D.  E.  Rosen 

736 

45 

9 

C.  A.  Reidy 

2117 

25 

10 

J.  A.  Ross  &  Co. 

546 

20 

6 

Accounts  Payable  Balance 

11560 

40 

11560 

40 

11560 

40 

Sales  Ledger  Proof.  To  prove  the  sales  ledger,  list  the  balances  of 
the  customers'  accounts  by  names  and  amounts.  The  sum  of  these 
balances  should  equal  the  balance  of  the  Accounts  Receivable  account 
in  the  general  ledger. 

Sales  Ledger  Proof,  October  31,  19 — 


3 

H.  Wilier  &  Co. 

478 

90 

5 

C.  J.  Hess 

1217 

80 

7 

D.  E.  Bunce  &  Co. 

3693 

25 

7 

F.  J.  Genz 

987 

55 

9 

C.  L.  Kern  &  Co. 

125 

80 

9 

D.  E.  Heston  &  Co. 

1578 

65 

10 

D.  J.  Drake 

1036 

45 

11 

J.  A.  Hofer 

572 

05 

12 

C.  E.  Hayes 

236 

40 

5 

Accounts  Receivable  Balance 

9926 

86 

9926 

85 

9926 

85 

General  Ledger  Proof.     To  prove  the  general  ledger,   take  a  trial 
balance   of   differences   in   the   usual   way.     The   Accounts   Payable   and 


218  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Accounts  Receivable  accounts  take  the  place  of  the  creditors'  and  cus- 
tomers' accounts  respectively. 

Exercise  51.     Draw  a  cash  book  form  like  the  model  in  this  chapter, 
and  make  the  following  entries  in  it: 

September    1.     Balance  of  cash  on  hand,  $5673.80. 
Enter  this  in  both  the  General  and  Cash  Dr.  columns. 

1.     Received  of  C.  J.  Joy  cash  for  invoice  of  August  22, 

amounting  to  $438.55,  less  2%. 
3.     Paid  $25  for  office  books' and  stationery. 
5.     Discounted  at  National  Exchange  Bank,  B.  L.  Pond's 
note  for  30  days,  dated  August  21,  for  $850.     The 
bank  charges  6%. 
8.     The  bank  has  charged  your  note  of  July  8,  payable 
two  months  after  date,  with  interest  at  6%,  for  $750. 
10.     The  bank  has  collected  your  sight  draft,  attached  to 
bill  of  lading,  on  F.  D.  Fellers,  for  $857.50.     The 
bank  charged  tV%  collection. 
12.     Received  $175  of  D.  G.   Minn,  on  account. 

14.  Paid  Jackson  Motor  Co.  $1200  for  a  motor  truck. 

15.  The  bank  reports  the  sight  draft  for  $500,  on  F.  E. 

Enders  &  Co.,  on  account  of  the  shipment  to 
them,  collected,  less  yV%- 

17.  Paid  cash  for  repairs  to  the  building  owned  and  used 

by  the  business,  $72.85. 

18.  Paid  C.  James  &  Co.  for  invoice  of  the  8th,  amount- 

ing to  $563.50,  less  2%. 

20.  Paid  cash  for  sacks  and  barrels  for  use  in  the  busi- 

ness, $7.25. 

21.  Discounted  at   the   National   Exchange   Bank,    C.    L. 

Winters'  note  for  $950,  dated  August  18,  payable 
60  days  after  date,  with  interest  at  6%.  The 
bank  charges  6%  discount. 

25.  Paid  freight  on  a  consignment  of  goods  received  from 
L.    N.    Norris,    to   be   sold   on   commission,    $18.50. 

27.  Received  of  B.  A.  Durbin  cash  for  invoice  of  Septem- 
ber 17,  amounting  to  $1012.75,  less  2%. 

29.  Paid  salaries  for  the  month  as  follows:     Bookkeeper 

$100;  stenographer  and  clerk,  $60;  deliveryman,  $50. 

30.  The  proprietor  withdrew  $75  for  personal  use. 
Close  the  cash  book  like  the  model  in  this  chapter. 

Exercise   52.     Draw   a   four-column   journal   like   the   model   in   this 
chapter  and  make  the  following  entries  in  it: 

October  3.     Accepted   C.    D.    Ray's   draft   at   30   days,    for  $387.15, 
for  invoice  of  September  30. 


CONTROLLING  ACCOUNTS  AND  COLUMNAR  BOOKS  219 

8.  Drew  a  sight  draft  for  $500,  on  J.  A.  Baer,  in  favor  of 
G.  L.   Lien,  and  remitted  it  to  him  on  account. 

10.  Received  H.  E.  Nacey's  note  at  30  days,  with  interest 
at  6%,  for  $375,  on  account. 

15.  Accepted  D.  L.  Jasper's  draft  at  30  days,  for  $300,  on 
account  of  the  consignment  of  goods  received  from 
him  to  be  sold  on  commission. 

25.  Transferred  H.  E.  Nacey's  note  for  $375,  dated  October 
10,  with  interest  at  6%,  to  M.  E.  Irving,  on  account. 
He  agrees  to  take  it  at  the  face  value  plus  the  interest 
to  date. 

30.  Shipped  to  B.  E.  Burton  &  Co.  a  shipment  of  merchan- 
dise amounting  to  $436.50,  to  be  sold  on  commission. 
Close  the  journal  like  the  model  journal  in  this  chapter. 


CHAPTER  XXVI 

METHODS  OF  RECORDING  SALES  AND  VARIOUS 

LEDGER  FORMS 


The  use  of  a  bound  sales  book  is  no  longer  common  in  business. 
It  necessitates  too  much  copying  and  makes  it  difficult  for  more  than  one 
to  work  on  the  sales  book  at  the  same  time.  Various  methods  have  come 
into  use  to  take  its  place.  The  student  should  be  familiar  with  the  most 
important  of  these. 

The  Duplicate  Charge  System.  In  this  system,  an  invoice  is  made 
out  and  at  the  same  time  a  duplicate  is  made  out.  These  may  be  made 
out  as  carbon  copies  in  pencil,  on  the  typewriter,  or  by  the  use  of 
a  duplicating  pen.  The  original  is  sent  to  the  customer  and  the  dupli- 
cate filed  in  a  binder.  This  binder  of  duplicate  invoices  is  the  sales 
book.  The  invoices  may  be  in  any  form  suitable  to  the  particular 
business  and  the  duplicate  invoice  may  contain  certain  printed  matter 
for  record  purposes  that  is  not  contained  on  the  original  invoice. 

From  the  duplicate  invoices,  the  accounts  of  customers  are  debited 
and  the  pages  of  the  ledger  accounts  put  on  the  duplicate  invoices. 
This  is  all  that  is  necessary  until  the  end  of  the  month.  Then  the 
total  sales  for  the  month  must  be  found.  The  usual  method  of  doing 
this  is  by  the  use  of  the  Sales  Recapitulation  Sheet. 

Sales  Recapitulation  She"et.  On  this  sheet  are  listed  the  invoices  by 
number  and  amount.  The  total  is  found  and  Sales  is  credited  from  this 
sheet  and  Accounts  Receivable  debited.  If  freight  is  frequently  prepaid 
for  customers  and  charged  to  them,  a  separate  column  should  be  kept 
for  Freight  Out  so  that  it  will  not  be  included  in  the  total  posted  to 
Sales. 

A  modification  of  this  system  is  used  by  many  businesses.  When 
an  order  comes  in,  it  is  entered  on  a  special  order  blank  containing  the 
information  necessary  for  making  out  the  invoice  and  also  various  details 
for  the  records  of  the  business.  The  order  form  contains  all  the  infor- 
mation necessary  for  posting.  It  is  bound  in  a  binder  and  the  orders 
numbered  consecutively.  This  constitutes  the  sales  book.  The  invoices 
are  made  out  in  the  usual  way  and  sent  to  the  customers. 

220 


METHODS  OF  RECORDING  SALES— VARIOUS  LEDGER  FORMS       221 


In  this  method  the  sales  recapitulation  sheet  is  made  out  the  same 
as  in  the  duplicate  charge  system.  In  both  methods,  it  is  best  to  file 
the  sales  recapitulation  sheet  in  the  binder  on  top  of  the  last  invoice 
or  order  included  in  it. 

Order  Blajsk 


O 


O 


ORDER 
NO 


SOLD  TO 


HIBBARD,  SPENCER,  BARTLETT  &  CO. 

State  Street  Bridge,  Chicago,  Illinois 

?  2-7<.5~  rkcfived    ZfeatZ  /fl,    I9_=r  mu.itn  /fn-7^  / //      i9_z= 


L.  F._ 


TERMS. 


%K 


•&L. 


~rf2^^J^^y^yj- 


SALESMAN- 


SHIP TO 


SHIP  BY. 


^22^Z 


?- 


T^TZ^T*^?  S^ 


DATE  SHIPPED 


/ffTT/^/Zy  19JZZ 


/ 


J~ 


r/^T^.c^Z^J^^yA/^^^^d^^^/?^, 


J7S         2/7, 


Z-. 


/  O-d^sJ^J^ *sJ^y>y^™^?7^/^ 


3 


/As'  3*/-^ro 


z. 


12, 


^Sp^B^d^ttJiZd^^dcCdsi^eJ.  2& 


'f-Jh 


? 


jM 


jz;.  /w 


La. 


/ 


/ /X  d^^JL^^j^v  Us^ssfssVr, 


+ 


<2J_. 


gd 


*P. 


3 


7 


£ 


Another  modification  of  the  Duplicate  Charge  system  uses  a  blank 
sales  sheet  for  the  duplicate  on  which  the  invoices  are  made  out  in  carbon, 
one  below  the  other.  These  duplicate  sales  sheets  are  of  the  size  of  the 
ordinary  sales  book  and  are  bound  in  a  binder.  These  constitute  the 
sales  book.  No  sales  recapitulation  sheet  is  necessary  as  each  sheet 
is  forwarded  to  the  next  the  same  as  in  the  bound  sales  book.  This 
method  cannot  be  used  to  advantage  except  when  the  billing  is  done 
on  the  typewriter. 

The  Sales  Journal.  Many  firms  do  not  like  to  post  from  the  duplicate 
invoice  or  from  the  order  blank,  nor  to  use  loose-leaf  sheets  for  the 
total  of  sales.     They  prefer  a  more  permanent  record  from  which  to  post. 


222 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


For  this  purpose,  the  sales  journal  is  used.  Either  the  orders  are  kept  and 
filed  or  the  duplicate  invoices  are  filed  as  a  record  of  the  articles  sold 
but  no  posting  is  done  from  them. 

From  the  order  blank  or  from  the  duplicate  invoice,  an  entry  is 
made  in  the  sales  journal.  The  entry  should  contain  the  following: 
date,  folio,  name  of  customer,  address  of  customer,  order  or  invoice 
number,  terms  of  sale  and  amount.  It  may  contain  distributive  columns 
for  various  kinds  of  sales. 

Sales  Journal 


DATE 

19— 

F 

NAME 

ADDRESS 

ORDER 
NO. 

TERMS 

AMT. 

Nov. 

28 
29 
30 
30 

30 

15 
12 
11 

9 
16 

Forward 

C.  J.  Sprague 

D.  L.  Hyde 

J.  D.  Beardslee 
Total  Sales 

Accounts   Receivab 
To  Sales 

City 

Aurora,  111. 
Beloit,  Wis. 

le 

576 

577 
578 

2/10,n/30 

n/30 
Sgt.  Dft. 

$7750.30 

6897 
417 
318 
116 

20 
25 
90 
95 

7750 

30 

7750 

30 

Retail  Bill  and  Charge  System.  Many  large  retail  stores  use  the 
Bill  and  Charge  system.  From  the  duplicate  sales  sheet  made  out  by 
a  clerk  in  pencil,  the  items  are  entered  on  the  typewriter  on  a  state- 
ment of  account  form  and  a  duplicate  made  at  the  same  time.  These 
are  attached  to  each  other  by  a  perforation  and  are  kept  in  files  ar- 
ranged alphabetically  until  the  end  of  the  month.  Then  they  are 
torn  apart  and  the  original  sent  to  the  customer.  The  duplicate  is 
kept  in  the  files  of  the  store.  With  this  duplicate  statement,  a  card 
ledger  is  usually  kept  in  which  the  sales  are  entered  each  day  in  total 
and  the  payments  posted  to  it  from  the  cash  book,  as  well  as  to  the 
Statement  of  account. 

Various  Ledger  Forms.  The  ledgers  that  have  been  used  in  the 
practice  work  have  been  bound  ledgers  ruled  in  the  ordinary  way.  In 
many  businesses  it  is  desirable  to  use  loose-leaf  or  card  ledgers.  It  is 
also  of  advantage  in  many  businesses  to  use  some  other  ruling  than  the 
ordinary  ledger  ruling.     These  ledgers  will  now  be  explained. 

Loose-Leaf  Ledgers.  There  are  many  advantages  in  favor  of  loose- 
leaf  ledgers  especially  for  sales  and  purchase,  ledgers. 

The  first  advantage  is  the  ability  to  keep  none  but  active  accounts 
in  the  ledger.  As  soon  as  an  account  is  paid  in  full  or  closed,  the 
ledger  sheet  is  removed  from  the  ledger  and  placed  in  a  transfer  binder. 
If  the  account  becomes  active  again,  the  sheet  is  removed  from  the 
transfer  binder  and  put  back  into  the  ledger  binder.  In  this  way, 
when    a    trial    balance    is    taken,    none    but    active    accounts    are    to    be 


METHODS  OF  RECORDING  SALES— VARIOUS  LEDGER  FORMS       223 


found  in  the  ledger.     Every  account  in  the  ledger  then  shows  a  balance. 

Another  advantage  of  loose-leaf  ledgers  is  that  they  are  self-index- 
ing, as  the  ledger  sheets  are  placed  in  the  ledger  after  the  proper  index 
tabs,  and  no  time  need  be  spent  in  looking  up  the  pages  of  the  accounts 
to  which  the  entries  are  to  be  posted.  In  posting  from  the  books  of 
entry  a  check  mark  should  be  used  instead  of  the  ledger  page  as  when 
a  bound  ledger  is  used.  This  check  mark  should  be  placed  in  the  folio 
column  of  the  book  of  entry  after  the  item  has  been  posted  to  the  ledger. 

Another  advantage  is  that  it  is  more  suitable  to  a  growing,  expand- 
ing business  than  a  bound  ledger. 

One  invariable  rule  should  be  followed  in  opening  up  accounts  in 
a  loose-leaf  ledger  and  that  is  that  but  one  account  should  be  opened 
up  on  a  sheet.  The  size  of  the  sheet  may  be  changed  to  suit  the  indi- 
vidual business. 

About  the  only  disadvantage  of  loose-leaf  ledgers  lies  in  the  use  of 
a  poor  binder  and  poor  paper.  In  that  case  the  sheets  may  not  hold 
and  there  is  danger  of  losing  the  sheets  and  of  losing  some  accounts. 

A  loose-leaf  ledger  with  a  Balance  column  is  illustrated  here. 


] 

jOOSb  Leaf  Ledger  with  Balance  Columi 

I 

»cco 
DDRESS  tyj    y^trt^^^t^C^fl 

INT  NO 

-*           )                                                     RATING                                                                                                1 
BUSINESS                                                                                     A 

st^y 

■                       , 

» 

,ouo 

~~ 

COT. 

1 

.^_ 

^L               *f 

JoC 

t/jl 

Co. 

Uji 

S-Q 

?s 

'/»„  -V^                   jzf 

7-/n 

liy 

J~o 

&3n 

Ao 

7ft*+ 

,T 

hZ 

/IT 

/ 

Uao 

2.3A 

3o 

i<*y 

ftf 

*?*£-                       saf 

2-<?C 

3  ca 

£o_ 

S3& 

C?<7 

*T) 

If 

\           '                              i2 

1/ 

7 

23o 

Aa 

3o# 

/ 

^^ 

oT 

' 

~^~n\— 

rv  J 

%  ) 

^ 1 

- 

4 

The  Card  Ledger.     The  card  ledger  is  used  largely  by  businesses  that 


224 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


have  a  large  number  of  accounts,  many  of  which  run  for  but  a  short 
time.  The  principal  advantages  are  the  same  as  for  loose-leaf  ledgers. 
The  active  accounts  are  kept  in  a  ledger  file  and  when  paid  are  trans- 
ferred to  a  transfer  file.  The  ledger  is  self-indexing,  the  ledger  cards  be- 
ing placed  in  the  file  after  the  proper  index  cards. 

Besides  having  the  same  advantage  of  being  suitable  to  a  growing, 
expanding  business,  it  enables  a  number  of  persons  to  work  on  the 
accounts  at  the  same  time.  It  also  enables  the  business  to  make  use 
of  inexperienced  clerks  to  take  the  cards  from  the  file  and  arrange  them 
in  the  proper  order  for  posting.  They  may  also  put  them  back  into 
the  ledger  file  and  in  that  way  save  the  time  of  the  bookkeeper. 

The  card  ledger  also  makes  it  possible  to  cross-index  the  cards 
for  special  purposes  and  to  use  tabs  to  indicate  the  accounts  that  are 
past  due,  those  to  which  collection  letters  have  been  sent,  etc. 

The  big  disadvantage  of  the  card  ledger  lies  in  the  fact  that  cards 
may  be  taken  out  for  reference  and  misplaced  or  lost. 

Various  forms  of  ledger  ruling  may  be  used  with  the  bound  ledger, 
the  loose-leaf  ledger,  or  the  card  ledger. 

One  of  the  most  popular  is  the  ledger  that  has  a  Balance  column 
on  one  side  or  both.  It  enables  the  bookkeeper  to  find  the  balance 
of  the  account  often  and  to  record  the  balance,  so  that  less  work 
needs  to  be  done  at  the  end  of  the  month.  This  has  already  been 
illustrated.  This  form  is  a  very  satisfactory  one  for  a  loose-leaf  ledger  for 
customer's  accounts. 

Ledger  with  Wide  Detail  Column.  In  some  businesses  it  is  desir- 
able to  have  a  special  wide  detail  column  in  which  the  items  charged 
may  be  detailed.     Such  a  form  is  illustrated  below. 


C.  C.  Gilles 


19— 


19— 


May 

June 
July 


21 
8 
9 


5  L.  L.  Ledgers  S 

1   Bill  and  Charge  Outfit  S 
1000  Catalogs  S 

5M  Letter  Heads  S 


190 

45 



June 

8 

C 

48 

50 

254 

5 

75 

July 

5 

C 

54 

250 

316 

250 

— 

295 

12 

50 

75 


The  Center-Column  Ledger.  This  form  of  ledger  is  preferred  by 
some.  It  has  the  advantage  of  bringing  the  amount  columns  together. 
This  makes  it  easier  to  compare  debit  and  credit  amounts  and  also 
makes  ruling  easier.  The  principal  disadvantage  is  in  the  fact  that 
the  date,  details,  and  folio  on  the  credit  side  must  be  written  right 
to  left  instead  of  in  the  usual  way. 


19— 


METHODS  OF  RECORDING  SALES— VARIOUS  LEDGER  FORMS       225 

C.  E.  Cory  lg_ 


Jan. 
Feb. 


8 
15 


L6 

24 


1275 
316 


1000 
500 


8 
14 


J 
C 


Feb. 
Mar. 


Other  Rulings  are  common  in  special  businesses  to  give  particular 
details.  These  are  most  common  in  card  ledgers.  Some  of  the  most 
common  forms  are  those  for  real  estate,  insurance,  magazine  or  news- 
paper subscriptions  or  advertisements,  loans,  ledgers  suitable  to  different 
professions,  such  as  those  for  lawyers,  physicians,  dentists,  etc. 

Self-Proving  Ledgers.  In  this  form  of  ledger,  the  names  of  the 
accounts  are  written  down  the  side  of  a  page,  instead  of  at  the.  top. 
The  account  runs  across  the  page  instead  of  down.  The  ledger  is 
provided  with  debit,  credit,  and  balance  columns  in  sections  for  months, 
weeks,  or  days.  Short  leaves  are  provided  so  that  the  names  of  the 
accounts  need  be  written  only  once  a  year.  The  ledger  gets  its  name 
from  the  fact  that  each  section  of  accounts  on  a  page  may  be  proved 
up  separately  as  often  as  desired.  The  sum  of  the  debit  balances  at 
the  beginning  of  the  month  added  to  the  debit  postings  must  equal 
the  sum  of  the  balances  at  the  end  of  the  month  and  the  credit  postings. 
Credit  balances  are  usually  written  in  red  ink  to  distinguish  them  from 
debit  balances.  This  form  of  ledger  has  the  advantage  of  proving  up 
the  posting  of  each    page    separately    and   thus   errors  can  be   localized. 

Self-Proving  Ledger 


January 

,19- 

NAMES 

BAL. 

»• 

1*1 

DEBITS    | 

D. 

F. 

CREDITS   I        BAL. 

1 

Lobas  &  Co.,  C.  H. 

316 

20 

8 

S 

316 

412 

30 

10 

C 

36 

300|- 

536 

30 

2 

896   Chestnut  St. 

20 

S 

425 

107 

80 

3 

4 

Lukins,   L.  A. 

537 

80 

12 

s 

347 

345 

30 

5 

c 

34 

315:80 

357 

30 

5 

Detroit,  Mich. 

20 

J 

15 

210 

6 

7 

Mabley  Co.,  The  J.  A. 

1290 

75 

6 

s 

297 

837 

50 

6 

c 

36 

1290 

75 

669 

20 

8 

Dayton,  Ohio 

15 

s 

365 

415 

20 

16 

c 

36 

700 

9 

25 

s 

392 

116 

50 

10 

11 

1 

The    principal    disadv 

anta 

se 

of 

th 

e   s 

elf-bj 

ila 

nci 

ng 

lee 

Iger 

is 

in    1 

,he 

fact   that   it   is    more    difficult   to    obtain   information   from   an    account 


226  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

running  across  the  page  than  from  one   running   down   the   page.     Espe- 
cially is  this  true  in  rendering  statements  of  account  to  customers. 

A  mercantile  business  that  uses  this  form  of  ledger  usually  has  it 
divided  into  weekly  or  monthly  sections.  Banks  that  use  this  form 
have  it  divided  into  daily  sections.  In  this  form  it  is  usually  called  the 
Boston  Bank  Ledger. 


CHAPTER  XXVII 

WHOLESALE  HARDWARE 

SET  VII 
Transactions  for  October  15-31 

Selling  Price  List 


ARTICLE 

KIND 

NO. 

QUANTITY 

PRICE 

Axes 

Steel 

40 

doz. 

$13.55 

Bit  Braces 

3202 

doz. 

23.35 

Bits 

Twist  Drill 

109A 

set 

1.15 

Chisels 

Very  Best     • 

2072 

doz. 

2.90 

Clamps 

Adjustable 

R225 

doz. 

6.45 

Compasses 

Eagle 

569 

doz. 

1.60 

Files 

New  American 

878 

doz. 

1.45 

Forks 

Hay 

2140 

doz. 

5.35 

Gauges 

Stanley 

705 

doz. 

1.20 

Gimlets 

2175 

doz. 

.80 

Hammers 

Very  Best 

212 

doz. 

4.70 

Hatchets 

0.  V.  B. 

420 

doz. 

8.35 

Knives 

Pocket 

1321 

doz. 

13.20 

Levels 

Stanley 

155 

doz. 

40.90 

Mallets 

Tinners' 

2120 

doz. 

2.85 

Padlocks 

Brass 

882 

doz. 

.75 

Planes 

Stanley  Jack 

370 

each 

1.55 

Plows 

Garden 

426 

each 

5.40 

Punches 

Spring 

440 

doz. 

3.25 

Rules 

Boxwood 

172 

doz. 

4.55 

Saws 

Cross  Cut 

080 

each 

3.55 

Saws 

Dexter  Hand 

605 

doz. 

5.75 

Scales 

Counter 

507 

each 

16.55 

Scales 

Platform 

M108 

each 

24.65 

Screw  Drivers         , 

302 

doz. 

3.35 

Shears 

Straight 

1044 

doz. 

5.65 

Sickles 

Little  Giant 

1263 

doz. 

3.75 

Skates 

B.  &  B. 

494 

pair 

1.45 

Step-ladders 

670 

each 

.95 

Try  Squares 

712 

doz. 

3.40 

Thermometers 

1452 

doz. 

2.60 

Vises 

Jersey 

114 

doz. 

9.95 

Wheelbarrows 

Steel 

1720 

each 

3.45 

Wrenches 

Coe 

640 

doz. 

7.25 

227 


223  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

The  Objects  of  this  set  are  as  follows: 

1.  To  teach  the  use  of  special  ledgers  for  customers'  and  for 
creditors'  accounts. 

2.  To  teach  the  use  of  controlling  accounts. 

3.  To  teach  the  use  of  columnar  books  of  entry. 

4.  To  teach  the  use  of  a  ledger  with  a  balance  column. 

5.  To  illustrate  the  method  of  adjusting  interest  between  partners. 

6.  To  furnish  a  sufficient  number  of  transactions  for  each  day's 
work  in  the  book  so  as  to  make  the  cash  proof  as  near  like  actual 
business  as  it  is  possible  to  make  it. 

Books  Used.  The  books  of  entry  used  in  this  Set  are  the  special 
column  cash  book,  the  loose-leaf  sales  book,  the  purchase  book,  and  the  four- 
column  journal.     A   general,   a  sales,   and  a  purchase  ledger  will  be   used. 

The  cash  book,  purchase  book,  and  journal  will  be  used  as  already 
explained. 

The  Sales  Binder.  When  an  order  is  received,  it  is  entered  on  an 
order  blank,  which  is  filed  in  a  sales  binder.  This  is  the  sales  book. 
The  posting  is  done  from  this  order  blank. 

From  the  order  blank,  an  invoice  is  made  out  and  sent  to  the 
customer. 

If  the  teacher  desires,  the  making  out  of  invoices  may  be  omitted. 

Incoming  Papers.  No  incoming  papers  are  'received  in  this  Set. 
A  pad  of  blank  checks  and  of  blank  N.  Y.  drafts  is  furnished.  On 
these,  incoming  checks  and  drafts  may  be  made  out.  On  the  receipt 
of  a  check  or  a  N.  Y.  draft,  the  words  Incoming  Check  or  Incoming 
N.  Y.  Draft  will  be  printed  in  the  text  for  ready  reference.  These  may 
be   made  out  daily. 

Proving  Cash.  It  is  desirable  that  the  check  book  and  pass  book 
be  used  in  order  that  cash  may  be  proved  daily.  If  the  incoming 
checks  and  N.  Y.  drafts  are  made  out,  deposits,  may  be  made  in  the 
usual  way  daily.  If  these  papers  are  not  made  out,  the  deposits  should 
be  entered  in  total  daily  from  the  entries  in  the  cash  book. 

Make  all  payments  by  check. 

The  method  shown  in  the  appendix,  page  i,  is  recommended  for  this  Set. 

Outgoing  Papers.  Outgoing  papers  are  not  essential  to  the  working 
of  this  Set,  but  outgoing  checks  and  outgoing  invoices  are  recommended. 
All  other  outgoing  papers  are  omitted  as  the  student  has  had  sufficient 
drill  in  making  them  out. 

Trading  Accounts.  The  following  trading  accounts  will  be  used  in 
this  Set:  Purchases,  Sales,  Freight  In,  Returns  and  Allowances  on 
Purchases,  Returns  and  Allowances  on  Sales,  and  Merchandise  Trading. 

October  15.  E.  B.  Gordon  and  C.  A.  King  have  this  day  entered 
into  a  copartnership  agreement,  to  engage  in  the  wholesale  and  jobbing 
hardware  business  at  27   W.   Lake  Street,   Chicago,   111.,  under  the  firm 


WHOLESALE  HARDWARE  229 

name  of  E.  B.  Gordon  &  Co.     The  special  terms  of  the  agreement  are: 

1.  E.  B.  Gordon  shall  contribute  cash,  $9000,  and  C.  A.  King  shall 
contribute  cash,  $6000. 

2.  The  partners  shall  share  profits  and  losses  equally. 

3.  Statements  shall  be  made  monthly  and  the  books  closed 
monthly. 

4.  Each  partner  shall  devote  his  entire  time  to  the  business. 

5.  Monthly  each  partner  shall  be  credited  with  $125  salary.  Each 
partner  may  draw  out  monthly  not  to  exceed  $125. 

6.  Neither  partner  shall  withdraw  any  part  of  his  investment. 

7.  The  partnership  shall  continue  for  two  years  unless  sooner 
dissolved  by  mutual  agreement. 

8.  Interest  at  6%  per  annum  shall  be  computed  at  the  end  of  each 
calendar  month  on  all  sums  invested,  on  all  salary  credited  to  the  partners' 
accounts,  and  on  all  sums  withdrawn. 

Two  checks  are  received  for  the  respective  partner's  investments.  En- 
ter them  in  the  usual  way.     (Incoming  Checks) 

Deposit  the  checks. 

Lease  the  store  building  at  27  W.  Lake  Street,  Chicago,  111.,  from 
C.  N.  Passel,  for  $150  a  month.  Pay  for  one-half  a  month's  rent. 
Open  a  Rent  account. 

Pay  a  bill  of  the  Whipple  Furniture  Co.,  for  furniture  and  fixtures, 
$57.80. 

Pay  D.  L.  Laird  for  making  alterations  to  the  building  to  make 
it  suitable  for  the  firm's   business,   $17.50.      Charge  the   Rent  account. 

The  firm  has  engaged  the  Student  as  bookkeeper  and  cashier  at  a 
salary  of  $60  a  month. 

The  firm  has  accepted  the  offer  of  the  Charles  Hardware  Co.,  City, 
to  sell  their  stock  of  hardware  for  $3625  on  the  terms,  n/30,  and  their 
delivery   truck   for   $1125,    cash.      Give   them   a   check  for   $1125. 

Employ  Charles  Sanborn  as  traveling  salesman  at  a  salary  of  $125 
a  month  and  expenses.  Give  him  a  check  for  $100  for  traveling 
expenses. 

Charge  this  check  to  his  account  in  the  general  ledger,  with  the 
word  Salesman  added.  When  he  reports  his  expenses,  you  will  credit 
his  account  through  the  journal  and  debit  Traveling  Expenses  account. 

If  there  were  a  large  number  of  salesmen,  it  would  be  best  to  keep 
the  accounts  of  traveling  salesmen  in  a  separate  ledger  with  one  con- 
trolling account  in  the  general  ledger  called  Advances  to  Traveling 
Salesmen. 

Employ  James  Roach  as  deliveryman  at  a  salary  of  $70  a  month. 

Prove  cash,  make  a  report,  and  post. 


230  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

In  posting  the  entries  for  this  day,  all  accounts  to  be  debited  or 
credited  are  general  ledger  accounts. 

Open  accounts  in  the  general  ledger,  two  on  a  page,  as  follows: 

Proprietors'  Capital  and  Personal  accounts  and  the  Asset  Accounts, 
pages  1-6 

Liability  Accounts,  pages  7-9 

Nominal  Accounts,  pages  10-21 

Open  accounts  in  the  purchase  ledger  in  the  order  that  they  occur 
in  the  transactions,  eight  on  a  page,  on  page  22. 

Open  accounts  in  the  sales  ledger  in  the  order  that  they  occur  in 
the  transactions,  six  on  a  page,  on  pages  23-26. 

October  16.  Buy  an  invoice  of  hardware  of  The  Roth  Hardware 
Co.,  St.   Louis,  amounting  to  $1786.50.     Terms:    2/10,  n/30. 

Buy  a  typewriter  of  the  Office  Supply  Co.  for  cash,  $75. 

Whenever  a  purchase  is  made  for  cash,  it  is  understood  that  a 
check  is  to  be  written  in  payment. 

Pay  the  freight  bill  on  the  invoice  of  hardware  received  today  by 
check  in  favor  of  the  Wabash  R.  R.,  $36.85. 

Insurance  policies  have  been  taken  out  on  the  stock  of  hardware, 
the  fixtures,  and  the  delivery  truck,  as  follows:  Hardware,  $6000; 
furniture  and  fixtures,  $125;    and  delivery  truck,  $1000. 

Pay  the  premium  by  check  in  favor  of  the  Hubbel  Insurance  Co. 
at  the  rate  of  55  cents  for  each  $100  in  the  risk.  The  policies  run 
for  one  year. 

Make  a  complete  memorandum  in  the  journal  in  addition  to  the  entry. 

J.  B.   Mauer  &  Co.,  Sioux  City,  Iowa,  order: 

5  doz.  Steel  Axes  No.  40 
10  Cross  Cut  Saws  No.  080 

6  doz.  O.  V.  B.   Hatchets  No.  420 
8  Counter  Scales  No.  507 

Terms:  2/10,  n/30. 

Enter  this  order  on  the  Order  Blank  in  your  outfit.     Make  out  an 
invoice   from   it.     File    the    order   in    your    Sales    Binder    and    place    the 
invoice  in  your   Outgoing   Papers   envelope.     The   filing   of   the   order  in 
the  Sales  Binder  takes  the  place  of  the  entry  in  the  sales  book. 
C.   L.   Walters,   Charleston,  111.,  orders: 
3  doz.  Very  Best  Chisels  No.  2072 
6  doz.  Pocket  Knives  No.   1321 
10  Steel  Wheelbarrows  No.   1720 
Terms:  cash. 

Fill  this  order  in  the  same  way  as  in  the  preceding  transaction. 
Each  order  is  to  be  filled  in  this  way,  without  further  instructions. 

A  New  York  draft  is  received  in  payment  of  this  order.  (Incoming 
New  York  Draft)   Deposit  the  draft.    Prove  cash,  make  a  report,  and  post. 


WHOLESALE  HARDWARE  231 

Posting  from  the  Order  Blank.  In  posting  from  the  Order  Blank, 
put  the  page  of  the  ledger  account  on  the  Order  Blank  and  put  S  and 
the  number  of  the  Order  Blank  in  the  ledger  account.  It  is  often  of 
decided  advantage  to  have  the  terms  of  sale  in  the  ledger  account  so 
that  the  time  when  an  invoice  should  be  paid  may  be  found  without 
referring  to  the  sales  binder.  You  will  be  required  to  do  this  for  this 
set. 

When  you  post  the  sale  to  the  account  of  J.  B.  Mauer  &  Co.,  you 
should  put  2/10,  n/30,  in  the  explanatory  column  of  their  account  in 
the  sales  ledger.  In  posting  the  sale  to  C.  L.  Walters,  put  Cash  in  the 
explanatory  column. 

If  the  firm  did  not  expect  to  make  Mr.  Walters  a  regular  cus- 
tomer, the  entry  might  be  checked  in  both  the  cash  book  and  in  the 
sales  binder  and  no  account  opened  up  for  him  in  the  sales  ledger. 

Find  the  balance  of  each  sales  ledger  account  and  of  each  purchase 
ledger  account  after  each  item  posted,  and  extend  the  balance  to  the 
Balance  column. 

October  17.  Buy  an  invoice  of  hardware  from  C.  Merton  &  Co., 
New  York,  amounting  to   $786.40.     Terms:    2/5,   1/10,  n/30. 

Pay  the  bill  of  the  Pleyte  Printing  Co.  for  business  stationery,  $9.50. 
Buy  packing  boxes  of  the  Fiber  Box  Co.,  City,  for  $157.50.     Terms: 
cash,  less  2%. 

Pay  this  bill.  Deduct  the  discount  before  making  the  entry.  Do 
not  enter  the  discount  in  the  cash  book.    Charge  it  to  Purchases. 

Pay  the  freight  on  incoming  goods  by  check  in  favor  of  the  Grand 
Trunk  R.  R.,  $21.35. 

Pay  the  bill  of  the  Fox  Auto  Co.  for  gasoline,  motor  oil,  and  motor 
supplies,  $27.25.     Charge  Delivery  Expense. 
M.  E.  Exeter  &  Co.,  Canton,  Ohio,  order: 
6  doz.  Bit  Braces   No.  3202 
5  doz.  Adjustable  Clamps  No.  R225 
8  Platform  Scales  No.  Ml 08 
2  doz.  Stanley  Levels  No.  155 
Terms:  draft,  10  days  after  date. 

Make  no  entry  for  the  draft  until  it  is  reported  accepted. 
D.  J.  Silber,  Keokuk,  Iowa,  orders: 
15  doz.  Boxwood  Rules  No.  172 
9  doz.  Dexter  Hand  Saws  No.  605 
12  doz.  Coe  Wrenches  No.  640 
15  doz.  O.  V.  B.  Hatchets  No.  420 
Terms:  2/5,  1/10,  n/30. 
J.  H.  Harlan,  South  Bend,  Ind.,  orders: 
8  doz.  Spring  Punches  No.  440 
18  doz.  Very  Best  Hammers  No.  212 


232  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

20  doz.  Screw  Drivers  No.  302 
8  doz.  Straight  Shears  No.  1044 
Terms:  2/10,  n/30. 

B.  C.  Deering,  Battle  Creek,  Mich.,  orders: 

50  Step-ladders  No.  670 
16  doz.  Stanley  Gauges  No.  705 
16  Counter  Scales  No.  507 
Terms:    note  at  30  days,  with  interest  at  6%.     The  note  will  be  re- 
ceived later. 

Prove  cash,  make  a  report,  and  post. 

October  19.  Pay  the  rent  of  a  garage  for  the  motor  truck  for  the 
balance  of  the  month,  by  check  in  favor  of  N.  E.  Sivyer,  $3. 

Buy  an  invoice  of  tools  of  the  Cleveland  Tool  Co.,  Cleveland, 
Ohio,  amounting  to  $375.80.  Terms:  30-day  draft.  The  draft  is  dated 
October  17,  and  has  been  honored  in  payment  of  the  invoice. 

Make  the  entries  for  the  purchase  and  for  accepting  the  draft. 

In  what  ledger  will  the  account  of  the  Cleveland  Tool  Co.  be  opened  up?  In  what  column  of 
the  journal  should  the  debit  to  this  account  be  entered?     Why? 

Buy  two  loading  trucks  of  the  Halter  Mfg.  Co.,  for  $7.75  each. 
Pay  for  them  by  check.     Open  an  account  for   Warehouse  Equipment. 

C.  L.  Norris  &  Co.,  Altoona,  Pa.,  order: 

25  doz.  New  American  Files  No.  878 
12  doz.  Tinners'  Mallets  No.  2120 
15  doz.  Jersey  Vises  No.  114 
Terms:  n/30. 

J.  A.  Dressier  &  Co.,  Peoria,  111.,  order: 
2\  doz.  Stanley  Levels  No.  155 
18     Stanley  Jack  Planes  No.  370 
30     doz.  B  &  B  Skates  No.  494 
5     doz.  Thermometers  No.  1452 
Terms:  2/10,  n/30,  f.  o.  b.,  Peoria,  111. 

Since  competition  is  strong  at  this  point,  we  have  agreed  to  pay 
the  freight  to  destination.  Pay  it  by  check  in  favor  of  the  Chicago  & 
Alton  R.  R.,  $9.35. 

This  is  a  selling  expense  and  should  be  charged  to  Freight  Out. 
P.  A.  Perry,  Omaha,  Neb.,  orders: 

5  doz.  Adjustable  Clamps  No.  R225 
8  doz.  Pocket  Knives  No.  1321 
50  doz.  Brass  Padlocks  No.  882 
8  doz.  Straight  Shears  No.  1044 
Terms:  sight  draft. 

Make  no  entry  for  the  draft  till  it  is  reported  collected. 
A  record  may  be  made  in  the  pass  book  on  the  last  page  to  show 
that  it  is  left  for  collection. 

Prove  cash,  make  a  report,  and  post. 


WHOLESALE  HARDWARE  233 

October  20.  Receive  of  M.  E.  Exeter  &  Co.  their  acceptance  of  our 
10-day  draft  for  the  sale  to  them  on  the  17th. 

The  debit  and  credit  are  the  same  as  for  similar  transactions  you 
have  had.  To  decide  in  what  column  to  place  each  amount,  ask  the 
question  as  to  what  ledger  will  contain  the  debit  account,  and  what 
the  credit  account.  In  what  ledger  is  the  account  of  M.  E.  Exeter 
&  Co.  opened  up?  Do  not  neglect  the  explanation.  Refer  to  the 
model  journal  as  an  example.    (Page  216) 

Receive  of  B.  C.  Deering  his  note  at  30  days,  with  interest  at  6%, 
for  the  sale  to  him  on  the  17th.     The  note  is  dated  October  19. 

Pay  $5  for  stamps.     Draw  a  cash  check. 

Buy  an  office  safe  of  the  Haskin  Safe  &  Lock  Co.,  for  $325.  Terms; 
n/30. 

Where  should  the  entry  for  this  purchase  be  made?     Why? 

The  Accounts  Payable  account  is  usually  used  for  the  accounts  of 
creditors  for  merchandise  purchased.  Place  the  credit  in  the  General 
column  and  open  the  account  in  the  general  ledger. 

Buy  five  tons  of  coal  of  the  Pennsylvania  Coal  Co.  at  $4.95  per 
ton.     Pay  the  bill. 

D.  J.  Silber  reports  one  dozen  Coe  Wrenches  sold  him  in  the  invoice 
of  the  17th  unsatisfactory.     Give  him  credit  for  them. 

Enter  in  the  Returns  &  Allowances  on  Sales  book.  Name  the 
article  returned  in  the  explanatory  column. 

What  is  the  debit  and  credit  effect  of  this  entry?  Why  is  a  separate  book  kept  for  transactions 
of  this  kind? 

H.  Decker,  City,  orders: 

3  doz.  Bit  Braces  No.  3202 
36  sets  Twist  Drill  Bits  No.  109A 
15  Stanley  Jack  Planes  No.  370 
6  doz.  Try  Squares  No.  712 
Terms:  2/5,  n/30. 

J.  A.  Green  &  Co.,  Butte,  Mont.,  order: 

8  doz.  Eagle  Compasses  No.  569 

5  doz.  Jersey  Vises  No.  114 

15  Platform  Scales  No.  M108 

Terms:  2/10,  n/30,  f.  o.  b.,  Minneapolis. 

Pay  the  freight  on  this  sale  by  check  to  the  C.  M.  &  St.  P.  R.  R., 
$7.25. 

C.  L.  St.  John,  Sedalia,  Mo.,  orders: 
20  Garden  Plows  No.  426 
15  Cross  Cut  Saws  No.  080 
8  Counter  Scales  No.  507 
Terms:  2/10,  n/30. 
Prove  cash,  make  a  report,  and  post. 


234  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

October  21.     Pay  C.  Merton  &  Co.  for  invoice  of  the  17th,  less  discount. 

Do  not  forget  to  make  a  memorandum  of  this  payment  in  the 
purchase  book,  in  addition  to  the  cash  book  entry. 

Receive  a  check  of  D.  J.  Silber,  for  the  balance  of  the  invoice 
of  the  17th,  less  discount.     (Incoming  Check) 

Pay  the  bill  of  the  Chicago  Scales  Co.  for  a  platform  scales  for  the 
warehouse,  $57.50. 

Enter  into  a  contract  with  the  Kramer  Advertising  Co.  to  adver- 
tise the  firm's  business,  for  $280.  Terms:  one-half  cash;  balance  in 
30  days.    Charge  Advertising  in  the  journal. 

Give  them  a  check  for  one-half  of  the  bill. 

Discount  at  National  Exchange  Bank,  M.  E.  Exeter's  acceptance  of 
the  17th.     The  bank  charges  6%. 

Give  the  Jonas  Motor  Co.  a  check  for  $8.25  for  repairs  to  the 
motor  truck. 

Buy  an  invoice  of  saws  of  the  Dexter  Saw  Co.,  Hartford,  Conn., 
amounting  to  $1097.80.     Terms:  2/15,  n/60. 

One  dozen  Steel  Axes  have  been  returned  to  The  Roth  Hardware 
Co.  as  unsatisfactory.     They  have  credited  our  firm  for  them  at  $10.40. 

Enter  in  the  special  book  for  this  purpose. 

What  is  the  debit  and  credit  effect  of  this  entry? 

F.  E.  Evans,  Columbus,  Ohio,  orders: 

5  doz.  Very  Best  Hammers  No.  212 
3  doz.  Dexter  Hand  Saws  No.  605 

1  doz.  Stanley  Levels  No.  155 
Terms:  express  C.  O.  D. 

M.  E.  Clinton  &  Co.,  Ft.  Wayne,  Ind.,  order: 

2  doz.  Bit  Braces  No.  3202 

24  sets  Twist  Drill  Bits  No.  109A 

3  doz.  O.  V.  B.  Hatchets  No.  420 

Terms:  cash,  less  3%.   Do  not  deduct  the  discount  on  the  order. 

A  N.  Y.  draft  is  received  with  the  order.      (Incoming  N.  Y.  Draft) 

J.  A.  Rogers  &  Co.,  Appleton,   Wis.,  order: 

5  doz.  Steel  Axes  No.  40 

3  doz.  Tinners'  Mallets  No.  2120 
12  Counter  Scales  No.  507 

25  pair  B  &  B  Skates  No.  494 

Terms:    note  at  30  days,  for  $150,  balance  on  account,   10  days. 

The  note  is  received  with  the  order. 

Deposit  the  check    and    the  N.  Y.  draft  received    today.     -^%  col- 
lection on  the  check. 

Prove  cash,  make  a  report,  and  post. 


WHOLESALE  HARDWARE  235 

October  22.  Buy  an  invoice  of  hardware  of  the  Simmons  Hardware 
Co.,  St.  Louis,  amounting  to  $1895.75.     Terms:    2/10,  n/30. 

Your  bank  reports  the  collection  of  the  sight  draft  on  P.  A.  Perry, 
in  payment  of  invoice  of  October  19.     Collection  to%« 

Receive  a  check  of  C.  L.  Norris  &  Co.,  on  account,  $100.  (Incom- 
ing Check) 

J.  A.  Dressier  &  Co.  report  two  dozen  thermometers  on  invoice  of 
the  19th  unsatisfactory.     Give  them  credit  for  them. 

Mr.  Gordon  has  been  looking  for  a  suitable  building  to  purchase 
for  the  firm's  use.  He  has  not  yet  found  one.  The  firm  has  decided 
to  invest  part  of  its  capital  temporarily  in  stocks  and  bonds  until  a  suit- 
able permanent  investment  is  found.  They  have  purchased  of  C.  B.  Myers 
&  Co.  three  C.  M.  &  St.  P.  Convertible  4%  Bonds  of  a  par  value  of 
$1000  each,  at  95£,  brokerage,  \%. 

Pay  for  them  by  check. 

The  market  price  of  95^  means  that  every  dollar  in  the  par  value 
of  the  bonds  costs  95^,  and  an  additional  \fc  for  brokerage.  The 
cost  of  the  bonds  is  found  by  multiplying  the  par  value  by  .95f . 

Charge  the  total  cost  to  the  Stocks  and  Bonds  account. 

Stocks  and  Bonds  Account.  Firms  frequently  make  either  tem- 
porary or  permanent  investments  of  this  kind.  A  distinction  must  be 
made  between  an  investment  in  stocks  or  bonds  that  are  reliable  and 
that  will  not  fluctuate  in  value  to  any  great  extent  and  a  speculation 
in  stocks  and  bonds  that  have  no  permanent,  stable  value.  For  a 
mercantile  business,  nothing  of  a  speculative  nature  should  be  considered. 

Two  accounts  should  be  kept  for  dealings  in  stocks  and  bonds,  one 
the  investment  account  of  Stocks  and  Bonds,  the  other,  the  nominal 
account  of  Stocks  and  Bonds  Expense  and  Income. 

The  account  of  Stocks  and  Bonds  should  be  debited  for  the  cost, 
including  brokerage,  of  the  stocks  and  bonds.  It  should  be  credited 
for  the  cost  of  the  stocks  and  bonds  sold.  The  account  should  at  all 
times  show  a  debit  balance,  if  anything,  and  is  therefore,  an  asset. 

Stocks  and  Bonds  Expense  and  Income  Account.  This  account  is 
kept  for  all  expenses  incurred  in  holding  the  stocks  or  bonds,  such  as 
assessments  on  stock,  and  for  all  income,  such  as,  dividends  on  stock 
or  interest  on  bonds.  It  must  also  show  any  profit  or  loss  when  the 
stocks  or  bonds  are  sold. 

Debit  Stocks  and  Bonds  Expense  and  Income  for  all  expenses 
incurred  in  holding  the  securities  and  for  any  loss  sustained  in  the 
sale  of  the  securities. 

Credit  Stocks  and  Bonds  Expense  and  Income  for  all  income  from 
securities  and  for  any  profit  on  the  sale  of  securities. 

This  is  a  nominal  account  and  is  closed  into  Profit  and  Loss  in 
the  usual  way. 


236  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

The  firm  has  also  purchased  of  D.  J.  Matthews  &  Co.,  fifty  shares 
Illinois  Central  Stock,  of  a  par  value  of  $100  each,  at  107^,  broker- 
age, |%. 

Pay  for  them  by  check. 

G.  A.  Kennedy,  St.  Louis,  Mo.,  orders: 
8  doz.  Very  Best  Chisels  No.  2072 

5  doz.  Pocket  Knives  No.  1321 
15  Cross  Cut  Saws  No.  080 

Terms:    2/10,  n/30,  f.  o.  b.,  St.  Louis. 

Prepay  the  freight  by  check  in  favor  of  the  Wabash  Railroad,  $9.60. 

C.  G.  Lynch  &  Co.,  Duluth,  Minn.,  order: 

3  doz.  Stanley  Levels  No.  155 
12  doz.  Boxwood  Rules  No.  172 

6  doz.  Screw  Drivers  No.  302 

4  doz.  Try  Squares  No.  712 
Terms:  draft  at  10  days'  sight. 

D.  L.  Jackson  &  Co.,  Memphis,  Tenn.,  order: 
24  Garden  Plows  No.  426 

5  doz.  Little  Giant  Sickles  No.  1263 
12  doz.  Coe  Wrenches  No.  640 

Terms:  n/30. 

Deposit  the  check  on  hand.      Collection  yo%. 

Prove  cash,  make  a  report,  and  post. 

October  23.  Twelve  wheelbarrows  have  been  returned  to  the  Sim- 
mons Hardware  Co.  as  faulty.  They  have  given  us  credit  for  them 
at  $2.85. 

M.  E.  Clinton  &  Co.  report  two  dozen  O.  V.  B.  Hatchets  unsuited 
to  their  trade.  As  they  have  paid  for  this  purchase  in  full,  they  should 
be  given  a  check  for  the  value  of  the  goods  returned.  Find  the  selling 
price  of  the  goods  returned.  Then  find  the  discount  on  it  at  3%. 
Write  a  check  for  the  difference. 

Make  an  entry  in  the  cash  book  on  the  Receipts  side  for  the  dis- 
count which  was  allowed  on  the  articles  returned  when  the  goods  were 
sold.  Enter  the  discount  in  the  General  column.  Make  an  entry  on 
the  Payments  side  for  the  value  of  the  goods  returned  before  the  dis- 
count is  deducted. 

Buy  filing  cabinets  for  use  in  the  office,  from  the  Moore  Supply 
Co.,  for  cash,  $48.50.     Pay  the  bill. 

Take  from  stock  for  use  in  the  warehouse: 
2  O.  V.  B.  Hammers  at  30^ 
2  Dexter  Hand  Saws  at  35j£ 
1  Bit  Brace  at  $1.65 
1  set  Twist  Drill  Bits  at  90^ 

This  is  not  a  sale.  Where  should  it  be  entered?  What  account  should  be  debited?  You  have 
already  opened  an  account  to  which  this  should  be  charged. 


WHOLESALE  HARDWARE  237 

Receive  a  check  of  J.  A.  Rogers  &  Co.  on  account,  $100.  (Incom- 
ing Check) 

Buy  an  invoice  of  hardware  from  D.  Ollum  &  Co.,  New  York, 
amounting  to  $1093.65.     Terms:  n/30. 

Pay  the  freight  on  invoices  of  hardware  by  check  in  favor  of  the 
Morse  Transfer  Co.,  $98.75. 

D.  J.  Field  &  Co.,  Grand  Rapids,  Mich.,  order: 

6  doz.  Adjustable  Clamps  No.  R225 
12  doz.  Very  Best  Hammers  No.  212 

8  doz.  Spring  Punches  No.  440 
Terms:  cash,  less  3%. 
A  New  York  draft  is  received  in  payment.     (Incoming  N.  Y.  Draft) 

G.  A.  Evers  &  Co.,  Denver,  Colo.,  order: 

5  doz.  Gimlets  No.  2175 
24  Stanley  Jack  Planes  No.  370 

8  doz.  Straight  Shears  No.  1044 

4  doz.  Coe  Wrenches  No.  640 
Terms:  2/10,  n/30. 

L.  E.  Widule,  Lincoln,  Neb.,  orders: 

4  doz.  Dexter'  Hand  Saws  No.  605 
8  Platform  Scales  No    M108 

3  doz.  Jersey  Vises  No.  114 
Terms:  draft  with  B/L  attached. 
The  draft  is  left  for  collection. 

H.  I.  Wheeler,  Lima,  Ohio,  orders: 
3     doz.  Steel    Axes    No.  40 
L|  doz.  Stanley  Levels  No.  155 
8     doz.  Screw  Drivers  No.  302 

5  doz.  Try  Squares  No.  712 
Terms:  2/10,  n/30. 

Deposit  the  N.  Y.  draft  and  the  check  on  hand.  i^%  collection  on 
the  check.   Prove  cash,  make  a  report,  and  post. 

October  24-  Receive  a  check  from  the  Adams  Express  Co.  for  the 
amount  of  the  sale  to  F.  E.  Evans  on  the  21st.     (Incoming  Check) 

The  traveling  salesman,  Charles  Sanborn,  reports  his  expenses  to 
date,  $37.80. 

This  amount  has  been  expended  from  the  amount  charged  to  him 
when  the  advance  was  made.  It  must  now  be  taken  out  of  his  account 
and  charged  to  Traveling  Expenses.     Make  a  journal  entry. 

E.  B.  Gordon  withdraws  $50  for  personal  use  by  check. 
C.  A.  King  withdraws  $60  for  personal  use  by  check. 


238  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Receive  a  check  of  H.  Decker,  for  invoice  of  the  20th,  less  discount. 
(Incoming  Check) 

H.  A.  Vinton,  Kenosha,  Wis.,  orders: 
3  doz.  Bit  Braces  No.  3202 
36  sets  Twist  Drill  Bits  No.  109A 
20  doz.  New  American  Files  No.  878 
15  Counter  Scales  No.  507 
Terms:  cash,  $200;  balance,  account  30  da. 

Receive  a  check  for  $200  in  part  payment  of  this  invoice.  (Incom- 
ing Check) 

P.  A.  Perry,  Omaha,  Neb.,  orders: 

40  Step-ladders  No.  670 

25  Steel  Wheelbarrows  No.  1720 
Terms:  2/10,  n/30. 

Deposit  the  three  checks  on  hand.   iV%  collection  on  H.A.Vinton's  check. 
Prove  cash,  make  a  report,  and  post.     Rule  and  forward  both  pages  of 
the  cash  book. 

October  26.  Buy  an  invoice  of  tools  of  the  Ohio  Tool  Co.,  Findlay, 
Ohio,  amounting  to  $678.95.     Terms:  2/10,  n/30. 

Receive  a  check  of  J.  B.  Mauer  &  Co.  for  invoice  of  the  16th,  less 
discount.     (Incoming  Check) 

Pay  The  Roth  Hardware  Co.  for  the  balance  of  the  invoice  of  the 
16th,  less  discount. 

Have  you  recorded  this  payment  in  the  purchase  book? 

Pay  the  freight  bill  on  the  invoice  of  tools,  by  check  in  favor  of 
the  Nickel  Plate  R.  R.,  $26.85. 

Buy  a  bill  of  boxes  for  packing  hardware,  of  the  Reber  Box  Co., 
$15.25.     Pay  the  bill. 

C.  A.  King  takes  for  personal  use,  one  Bit  Brace  No.  3202  at  $1.65; 
one  set  Twist  Drill  Bits  No.  109A  at  90^;  and  one  Wheelbarrow  No.  1720 
at  $2.85. 

Where  should  this  entry  be  made?    Why?    What  account  should  be  credited?    Why? 

G.  A.  Kennedy  reports  two  Cross  Cut  Saws  No.  080,  on  invoice  of 
the  22d,  unsatisfactory.     Give  him  credit  for  them. 

Receive  the  acceptance  of  our  draft  on  C.  G.  Lynch  &  Co.,  for 
invoice  of  the  22d.     The  acceptance  is  dated  October  24. 

H.  Decker,  City,  orders:. 

6  doz.  Very  Best  Chisels  No.  2072 
5  doz.  Stanley  Gauges  No.  705 
18  Cross  Cut  Saws  No.  080 
12  Platform  Scales  No.  M108 
Terms:  2/5,  1/10,  n/30. 


WHOLESALE  HARDWARE  239 

C.  L.  Norris  &  Co.,  Altoona,  Pa.,  remit  a  check  for  $150,  od 
account,  and  order:  (Incoming  Check) 

12  doz.  Pocket  Knives  No.  1321 

2  doz.  Stanley  Levels  No.  155 
Terms:  n/30. 

J.  H.  Harlan,  South  Bend,  Ind.,  orders: 
15  doz.  Adjustable  Clamps  No.  R225 
50  doz.  Brass  Padlocks  No.  882 
5  doz.  Thermometers  No.  1452 

Terms:  2/10,  n/30. 

Deposit  the  two  checks  on  hand.  Yt%  collection  on  the    checks. 

Prove  cash,  make  a  report,  and  post. 

October  27.  D.  L.  Jackson  &  Co.  have  returned  four  Garden  Plows 
No.  426  as  unsatisfactory.     Allow  them  credit  for  them. 

Receive  a  check  of  J.  H.  Harlan,  for  invoice  of  the  17th,  less  discount. 
(Incoming  Check) 

The  Student  should  now  be  familiar  enough  with  the  work  of  this 
set  so  that  less  information  about  transactions  need  be  given.  Here- 
after when  cash  is  received  or  paid  for  an  invoice,  nothing  will  be  said 
about  whether  there  is  discount  to  be  allowed  or  not  nor  whether  there 
has  been  an  allowance  made  for  rebates  or  for  returned  goods.  The 
Student  must  depend  on  his  entries  and  on  his  ledger  accounts  to  give 
him  the  necessary  information. 

Several  days  ago  the  C.  L.  Ross  Stove  Co.,  Detroit,  Mich.,  asked 
us  to  sell  50  stoves  on  commission.  The  firm  agreed  to  do  it.  They 
have  been  received.  By  agreement,  they  are  to  be  sold  for  $17.50  and 
the  firm  is  to  receive  8%   commission.     Make  the  usual    memorandum. 

Pay  the  freight  on  the  consignment  of  stoves  by  check  in  favor  of 
the  Michigan  Central  R.  R.,  $38.75. 

J.  A.  Rogers  &  Co.  have  asked  permission  to  prepay  their  note  for 
$150.     We  have  agreed  to  allow  them  discount  at  6%. 

Receive  a  N.  Y.  draft  in  payment  of  the  proceeds  of  this  note. 
(Incoming  N.  Y.  Draft) 

M.  E.  Clinton  &  Co.,  Ft.  Wayne,  Ind.,  order: 

3  doz.  Steel  Axes  No.  40 

5  doz.  Very  Best  Hammers  No.  212 

6  doz.  O.  V.  B.  Hatchets  No.  420 
Terms:  2/10,  n/30. 

They  have  asked  us  to  ship  the  goods  to  D.  L.  Hahn,  Bluffton, 
Ind.,  and  to  prepay  the  freight  and  charge  it  to  them. 

Prepay  the  freight  by  check  to  the  Pennsylvania  R.  R.  Co.,  $7.65. 

In  charging  this  to  M.  E.  Clinton  &  Co.  on  the  Cash  Payments, 
the  entry  must  be  made  in  the  General  column,  as  there  is  no  column 
for    Accounts    Receivable    on    the    Cash    Payments.     It    must    also    be 


240  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

posted  to  the  debit  of  Accounts  Receivable  in  the  general  ledger. 
Write  Accounts  Receivable  in  parenthesis  after  M.  E.  Clinton  &  Co.  to 
show  this. 

P.  A.  Perry,  Omaha,  Neb.,  orders: 
15  Counter  Scales  No.  507 
8  Platform  Scales  No.  M108 

Terms:  n/30. 

Deposit  the  check  and  N.  Y.  Draft  on  hand.  -ru%  collection  on 
the  check. 

Prove  cash,  make  a  report,  and  post. 

October  28.  The  bank  reports  the  sight  draft  on  L.  E.  Widule,  for 
invoice  of  the  23d  collected.     Collection  charge,  ■§■%. 

Receive  of  J.  A.  Dressier  &  Co.  a  check  for  $150,  on  account. 
(Incoming  Check) 

As  he  is  entitled  to  2%  discount,  he  must  be  given  credit  for  more 
than  the  amount  remitted. 

Divide  the  amount  received  by  .98  to  find  the  amount  of  the  credit  to  him.  Prove  the  result 
by  taking  2%  of  the  amount  to  be  credited  and  subtracting  it.  The  difference  should  equal  the 
amount  of  the  check,  $150. 

After  the  amount  to  be  credited  has  been  found,  make  th,e  entry 
in  the  usual  way. 

C.  A.  King  has  paid  out  $5.50  for  subscriptions  to  trade  journals. 
Give  him  a  check  to  reimburse  him. 

Pay  the  gas  bill  by  check  in  favor  of  the  People's  Gas  Co.,  $4.75. 

D.  J.  Field  &  Co.,  Grand  Rapids,  Mich.,  order: 

5  doz.  Dexter  Hand  Saws  No.  605 

4  doz.  Straight  Shears  No.  1044 
Terms:  2/10,  n/30. 

Deposit  the  check  on  hand.     to%  collection. 
Prove  cash,  make  a  report,  and  post. 

October  29.  Buy  an  invoice  of  tools  of  the  Cleveland  Tool  Co., 
Cleveland,  Ohio,  amounting  to  $1016.50.  Terms:  30-day  draft  for  $500; 
balance,  on  account. 

The  draft,  dated  October  27,  has  been  accepted  and  returned  to 
them. 

The  Ohio  Tool  Co.  has  offered  us  an  extra  discount  if  we  pay  their 
account  in  full.  They  have  agreed  to  allow  us  discount  of  3%  instead 
of  2%,  for  anticipating  payment.     Write  the  check  on  this  basis. 

Post  these  transactions. 

October  80.  Receive  a  check  of  J.  A.  Green  &  Co.,  for  invoice  of 
the  20th.     (Incoming  Check) 

They  have  included  the  collection  charge,  42j£,  in  the  check. 
Credit  Collection  and  Exchange  for  the  42^. 


WHOLESALE  HARDWARE  241 

Receive  a  check  of  C.  L.  St.  John  for  invoice  of  the  20th.  (Incom- 
ing Check) 

J.  B.  Mauer  &  Co.,  Sioux  City,  Iowa,  order: 
20  Ross  Stoves  at  $17.50 
15  Steel  Wheelbarrows  No.  1720 
Terms:  2/10,  n/30  on  the  wheelbarrows;  n/30  on  the  stoves. 
Make  two  entries  for  this  transaction  as  the  stoves  are  sold  from 
the  consignment  and  must  not  be  entered  on  the  sales  blank.     The  debit  in 
the  journal  must  be  posted  twice.     Why? 
J.  A.  Dressier  &  Co.,  Peoria,  111.,  order: 
30  Stanley  Jack  Planes  No.  370 
4  doz.  Jersey  Vises  No.  114 
3  doz.  Coe  Wrenches  No.  640 
Terms:  2/10,  n/30,  f.  o.  b.,  Peoria,  111. 

Prepay  the  freight  on  this  shipment  by  check  in  favor  of  the 
Chicago  &  Alton  R.  R.  Co.,  $8.20. 

J.  A.  Rogers  &  Co.,  Appleton,  Wis.,  order: 

20  Ross  Stoves  at  $17.50 
Terms:  cash,  $200;  balance,  on  account. 

Where  should  this  sale  be  entered?    Why? 

Receive  their  check  for  $200.     (Incoming  Check) 

D.  L.  Jackson  &  Co.,  Memphis,  Tenn.,  order: 
10  Ross  Stoves  at  $17.50 
25  Garden  Plows  No.  426 

Terms:  n/30. 

Deposit  the  three  checks.     to%  collection. 

Prove  cash,  make  a  report,  and  post. 

October  SI.  Render  account  sales  to  the  C.  L.  Ross  Stove  Co.  for  the 
stoves  sold.    Charge  commission  at  8%.     Remit  the  net  proceeds  by  check. 

Pay  the  salaries  to  the  Student  and  to  James  Roach,  each  for  one-half 
a  month.     Charge  the  student's  salary  to  the  Salaries  account. 

Charles  Sanborn  reports  his  expenses  for  the  week,  $32.65.  Give 
him  credit  for  the  amount. 

Give  Charles  Sanborn  a  check  for  one-half  a  month's  salary. 

Credit  each  partner  for  one-half  a  month's  salary  according  to  the 
articles  of  copartnership.     Do  not  enter  this  in  the  cash  book. 

Prove  cash,  make  a  report,  and  post. 

CLOSING    WORK 

1.  Find  the  total  of  the  Amount  column  of  the  purchase  book  and 
make  the  closing  entry.     Rule,  and  post  the  entry. 

2.  Take  a  sales  recapitulation  sheet  from  your  supplies.  List  the 
sales  by  date,  order  number,  and  amount.  Find  the  total  amount  and 
make  the  closing  entry.     Post  the  entry. 


242  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

3.  Find  the  total  of  each  amount  column  of  the  cash  book.  Prove 
the  sum  of  the  first  two  columns  of  the  Cash  Receipts  with  the  last 
two  columns.  Prove  the  sum  of  the  first  three  columns  of  the  Cash 
Payments  with  the  last  two  columns.  Make  the  closing  entries  for  the 
different  columns  of  the  cash  book  and  post  them.     Balance  the  cash  book. 

4.  Find  the  total  of  each  column  of  the  journal  and  prove  the 
sum  of  the  two  debit  columns  with  the  sum  of  the  two  credit  columns. 
Close  the  journal  and  post  it. 

5.  Close  the  Returns  and  Allowances  on  Sales  book.  Post  the 
closing  entry. 

6.  Close  the  Returns  and  Allowances  on  Purchases  book.  Post 
the  closing  entry. 

7.  Make  a  proof  of  the  sales  ledger. 

8.  Make  a  proof  of  the  purchase  ledger. 

9.  Take  a  trial  balance  of  the  general  ledger. 

Set  VII,  October  will  be  completed  in  chapter  XXVIII. 


CHAPTER  XXVIII 
ADJUSTMENT  ENTRIES 


Adjustment  Entries  are  of  three  kinds:  those  made  to  adjust  some 
error  in  the  entries  for  the  daily  transactions  or  in  closing  the  books, 
those  made  necessary  by  some  unusual  happening,  such  as  a  fire  or  an 
embezzlement,  and  those  made  necessary  because  of  some  partnership 
agreement. 

Errors  in  Entering  the  Daily  Transactions  are  of  different  kinds.  To 
correct  any  error,  the  explanation  should  be  very  clear  and  definite 
both  in  the  book  of  entry  and  in  the  ledger.  The  following  examples 
will  illustrate  some  of  the  most  important  errors  and  the  method  of 
adjusting  them. 

1.  A  Charge  to  the  Wrong  Account.  Suppose  the  bookkeeper  has 
by  mistake  charged  D.  L.  Smith  with  $375  in  the  sales  book  and  posted 
it  to  the  ledger.  He  afterwards  discovers  that  the  charge  should  have 
been  to  D.  L.  Simmons'  account.  The  entry  to  adjust  should  be  made 
in  the  journal,  as  follows: 

GENERAL         ACCTS.   REC. 

D.  L.  Simmons  (Accounts  Receivable)  $375 

To  D.  L.  Smith  $375 

To   correct   the   charge   made   on   the 
10th  in  the  sales  book. 

Since  there  is  no  debit  column  in  the  journal  for  Accounts  Receiv- 
able, it  is  necessary  to  put  the  debit  to  D.  L.  Simmons'  account  in  the 
General  column  and  to  post  the  amount  to  the  debit  of  his  account  in 
the  sales  ledger  and  also  to  the  debit  of  Accounts  Receivable  in  the 
general  ledger. 

The  ledger  account  of  D.  L.  Simmons  should  show  that  this  is  to 
correct  a  charge  that  should  have  been  made  on  the  10th.  The  ledger 
account  of  D.  L.  Smith  should  show  that  this  entry  is  to  correct  an 
error,  so  that  when  a  statement  of  account  is  sent  to  him,  the  items 
of  $375  on  each  side  will  not  be  entered  on  it. 

In  these  journal  entries,  all  amounts  will  be  placed  to  the  right  to  show  the  debit  and  credit 
effect  better. 

2.  Sight  Draft  Dishonored.     A  sight  draft  may  have  been  drawn 

243 


244  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

on    May   3,    on    C.    D.    Comstock,    in   favor    of    D.    J.    Lawler,    and   the 
following  entry  made: 

ACCTS.   PAY.         ACCTS.  REC. 

D.  J.  Lawler  $200 

To  C.  D.  Comstock  $200 

When  the  draft  is  presented  for  payment,  C.  D.  Comstock  refuses 
to  pay  it,  and  D.  J.  Lawler,  the  payee,  returns  it  to  the  drawer.  The 
drawer  must  then  make  an  entry  to  adjust,  as  follows: 

GENERAL  GENERAL 

C.  D.  Comstock  (Accounts  Receivable)  $200 

To  D.  J.  Lawler  (Accounts  Payable)  $200 

To  adjust  entry  of  May  3,  be- 
cause draft  was  dishonored. 

3.  Cash  Shortage  or  Cash  Over.  It  may  be  necessary  to  make  a 
temporary  entry  to  account  for  a  shortage  of  cash  or  for  an  amount 
over.  To  adjust  this,  a  Cash  Difference  account,  a  Suspense  account, 
or  an  Adjustment  account  may  be  used.  In  the  illustrative  entries  to 
follow  the  Cash  Difference  account  will  be  used. 

Cash  Difference  Account.     If  the  cash  is  short  $10,  and  it  cannot 
be  found,  the  following  entry  may  be  made  on  the  Cash  Payments: 
Jan.  10     Cash  Difference    Shortage  $10 

When  the  mistake  is  found,  a  counterbalancing  entry  is  made  on 
the  Cash  Receipts: 

Jan.  15     Cash  Difference    Shortage  on  the  10th      $10 

The  entry  is  then  made  as  it  would  have  been  made  on  the  day 
the  shortage  was  discovered.  Suppose  it  was  a  withdrawal  of  a  partner, 
the  entry  on  the  Cash  Payments  would  be  as  follows: 

Jan.  15     Partner,  Personal  Withdrawal  on  the  10th  $10 

Suppose  there  was  "cash  over,"  that  is,  the  balance  in  the  cash 
book  was  less  than  the  actual  cash  on  hand.  The  entry  on  the  Cash 
Receipts  would  be  as  follows: 

Jan.     8     Cash  Difference    Cash  over  $15 

When  the  mistake  is  found,  Cash  Difference  is  debited  on  the  Cash 
Payments.  The  correct  entry  is  then  made  on  the  Receipts  side,  such 
as,  a  credit  to  Interest,  if  interest  on  a  notes  receivable  was  omitted;  a 
credit  to  a  customer's  account,  if  the  receipt  of  money  from  a  customer 
was  not  recorded. 

The  debits  and  credits  to  Cash  Difference  may  be  entered  in  red 
ink  on  the  cash  book. 

The  Cash  Difference  account,  on  closing  the  books,  should  be 
treated  as  a  profit  or  a  loss  depending  upon  which  side  is  the  larger 
unless  the  items  are  of  recent  date  and  there  is  a  possibility  that  they 
may  be  found.  These  items  may  be  treated  as  an  asset  if  the  debit 
side  is  the  larger  and  as  a  liability  if  the  credit  side  is  the  larger. 


ADJUSTMENT  ENTRIES  245 

4.  Books  Out  of  Balance.  Sometimes,  on  taking  charge  of  a  set 
of  books,  it  is  found  that  they  are  out  of  balance,  and  that  the  amount 
cannot  be  found.  It  is  often  necessary  to  put  the  books  in  balance 
while  looking  for  the  mistake.  The  Adjustment  account  is  usually 
used  for  this  adjustment.  If  $50  is  needed  on  the  debit  side  to  make 
the  trial  balance  equal,  the  Adjustment  account  should  be  debited  in 
the  journal.  This  is  not  an  entry,  as  there  is  no  credit  for  it.  A 
charge  or  credit  for  a  failure  to  get  a  trial  balance  should  never  be 
made  except  upon  the  advice  and  consent  of  the  proprietors  of  the 
business,  and  under  the  conditions  named.  An  error  in  a  trial  balance 
that  occurs  after  a  bookkeeper  is  regularly  employed  should  not  be 
adjusted  in   this   way.      The  mistake  should  be  found. 

The  Adjustment  account,  when  the  books  are  closed,  may  be 
treated  as  an  asset  or  as  a  loss,  if  a  debit,  and  as  a  liability  or  a 
profit,  if  a  credit.  If  the  amount  is  not  large,  it  is  usually  best  to 
transfer  it  to  the  Profit  arid  Loss  account,   on  closing  the  books. 

5.  Failure  of  a  Customer.  An  adjustment  entry  may  become 
necessary  if  a  customer  fails  and  can  pay  only  part  of  his  account. 
If  he  has  taken  the  necessary  legal  steps  and  is  discharged  from  bank- 
ruptcy, he  is  released  from  the  balance.  The  entry  must  be  made  so 
as   to  show  this. 

Suppose  that  C.  L.  Kohn  owes  the  business  $235  on  account.  He 
fails  and  can  pay  only  60^  on  the  dollar.  The  entries  must  be  made 
so  as  to  show  the  account  closed.  On  the  Cash  Receipts,  the  entry 
would  be: 

ACCTS.   REC. 

Jan.     20     C.     L.     Kohn     60^     on    the     dollar  $141 

In  the  journal,  the  following  entry  would  be  made:, 

GENERAL      ACCTS.  REC. 

Reserve,  for  Bad  Debts  $94 

To  C.  L.  Kohn  $94 

Loss    of    40^    on    the    dollar 
due  to  bankruptcy. 
If   no   Reserve  for   Bad   Debts   has   been   set   up   on   the   books,   the 
debit  would  be  to  the  Bad  Debts  account.     The  Bad  Debts  account  is, 
of  course,  a  loss  and  should  be  charged  to  the  Profit  and  Loss  account 
when  closing  the  books. 

6.  To  Adjust  Mistakes  in  Closing  the  Books.  Mistakes  of  this 
kind  may  be  due  to  errors  in  computing  inventories,  errors  in  principle, 
such  as  considering  an  account  or  item  an  asset  instead  of  a  loss,  or 
errors  of  omission.  The  supposition  is  that  the  mistakes  are  discovered 
after  the  books  have  been  closed. 


246  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Examples : 

a).    Suppose  an  error   of   $1000  was  made  in  computing  the  inven- 
tory,   the    correct    amount    being    $1000    less    than    the    one    used.     The 
following  entries  should  be  made  to  adjust  the  error: 
Profit  and  Loss  $1000 

To  Purchases  $1000 

To  adjust  error  in  computing  the 
Then:  inventory. 

Partner,  Capital  $500 

500 
To  Profit  and  Loss  $1000 

If  the  inventory  had  been  computed  $1000  short,  the  entries  would 
be  reversed.  In  a  corporation,  the  Surplus  account  would  be  debited 
instead  of  the  partners'   capital  accounts. 

b)     Suppose    a   charge    of   $150    for   painting   a   building   has   been 
debited  to   Real  Estate  instead  of  to  its  nominal  account.     This  is  an 
error  of  principle.     To  adjust  it  make  the  following  entry: 
Real  Estate  Expense  and  Income  $150 

To  Real  Estate  $150 

To  adjust  a  wrong  charge  for  painting 

Then:  a  building- 

Profit  and  Loss  $150 

T,       ,       To    Real    Estate     Expense    and    Income  $150 

Partner,  Capital  $75 


U  11 


75 


To  Profit  and  Loss  $150 

c)  Suppose    that    there     is  an    inventory    of    unused    advertising 
that  has  not  been  entered.     The  following  entry  should  be  made: 

Advertising  $300 

To  Profit  and  Loss  $300 

rp,       ,  Inventory  omitted. 

Profit  and  Loss  $300 

To  Partner,  Capital  $150 

150 

d)  A  liability  inventory,  such  as  for  labor  may  have  been  omitted. 
The  entries  to  adjust  would  be  as  follows: 

Profit  and  Loss  $250 

To  Labor  (or  Expense)  $250 

T,       ,  Inventory  omitted. 

Partner,  Capital  $125 

"  "  125 

To  Profit  and  Loss  $250 


ADJUSTMENT  ENTRIES  247 

Whenever  adjustments  are  made  that  affect  any  results  in  the 
statements  of  Assets  and  Liabilities  or  in  the  Trading  and  Profit  and 
Loss  statements,  a  correction  should  be  made  below  the  statements 
and  the  correct  results  shown. 

7.  Fire  Loss.  When  a  fire  occurs  it  is  best  to  open  up  a  special 
account  instead  of  charging  the  loss  to  Profit  and  Loss.  When  the 
adjustment  is  made  with  the  insurance  company,  and  the  cash  is 
received,  entries  should  be  made  on  the  Cash  Receipts  crediting  the 
accounts  that  represent  the  assets  destroyed. 

Suppose  that  a  building  valued  on  the  books  at  $10,000,  goods 
valued  at  $3500,  and  office  furniture  and  fixtures  valued  at  $475  were 
destroyed.  The  insurance  company  paid  $8000  on  the  building,  $2750 
on  the  goods,  and  $360  on  the  furniture  and  fixtures. 

The  entry  on  the  Cash  Receipts  for  the  cash  received  would  be 
as  follows: 

Oct.    8     Real  Estate      Insurance  adjustment       $8000 
8     Purchases  "  "  2750 

8     Fur.  &  Fix.  "  "  360 

The  loss  on  these  assets  should  be  charged  to  Fire  Loss  by  a 
compound  journal  entry,  as  follows: 

Fire  Loss  $2865 

To  Real  Estate  $2000 

Purchases  ,  750 

Fur.  and  Fix.  115 

Loss  due  to  fire  Sept.  20,  19 — 

The  unexpired  insurance  still  on  the  books,  in  the  case  of  a  total 
loss,  should  be  charged  to  Fire  Loss.  If  only  a  partial  loss  occurs,  a 
proportionate  amount  should  be  charged  off,  as: 

Fire  Loss  $35 

To  Insurance  $35 

Unexpired  premium  lost  on  account  of 
fire,  Sep.  20,   19— 

The  Fire  Loss  account  represents  an  unusual  loss  and  is  best  closed 
into  the  partners'  accounts  by  a  charge  to  these  accounts  in  the  pro- 
portion in  which  they  share  the  losses  and  a  credit  to  Fire  Loss.  This 
should  be  done  at  once  and  should  not  be  left  till  statements  are  made. 
In  a  corporation,  it  should  be  closed  into  Surplus. 

v  8.  Interest  on  Partners'  Capital  and  Withdrawals.  Articles  of 
co-partnership  frequently  provide  for  interest  on  partners'  capital  and 
may  provide  for  interest  on*  their  withdrawals.  This  is  done  when  the 
capitals  are  unequal  and  the  partners  share  gains  and  losses  equally 
or  in  some  other  proportion  than  the  ratio  of  each  one's  capital  to  the 
total  capital. 


248  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

If  A  invests  $15000  in  a  partnership  and  B,  $10000,  and  they 
share  gains  and  losses  equally,  it  would  be  fair  to  credit  each  one  with 
interest  on  his  investment  at  an  agreed  rate.  But  if  they  invest  as 
before  and  A  is  to  receive  ^f  or  f  of  the  profits  and  B,  ^-§-  or  f,  no 
adjustment  of  interest  is  necessary.  It  is,  therefore,  only  necessary 
when    the    profit-sharing    ratio    is    different    from    the    capital    ratio. 

The  articles  of  copartnership  must  definitely  state  that  interest  is 
to  be  credited  on  investments  and  charged  on  withdrawals  in  order  to 
permit  the  bookkeeper  to  make  the  adjustments. 

To  Compute  Interest  on  Partners,  Accounts  : 

1.  Find  the  interest  on  each  credit  entry  in  the  capital  and  per- 
sonal accounts  from  the  date  of  the  entry  to  the  date  of  adjustment. 

2.  Find  the  interest  on  each  debit  entry  in  the  capital  and  per- 
sonal accounts  in  the  same  way. 

3.  Find  the  difference  between  the  credit  and  debit  interest  for 
each  partner.     This  difference  represents  the  amount  due  each  partner. 

4.  To  adjust,  make  an  entry  debiting  Profit  and  Loss  and  crediting 
the  partners'  personal  accounts.  This  should  be  done  after  the  nominal 
accounts  have  been  closed  into  Profit  and  Loss  and  the  net  profit  has 
been  found.  Each  partner,  then,  receives  part  of  his  profits  as  interest. 
This  entry  is  really  a  distribution  of  part  of  the  profits  and  not  a  loss 
such  as  the  payment  of  interest  on  a  loan  to  a  partner  or  to  someone 
outside  the  business. 

Example : 

To  adjust  interest  at  6%,  on  May  31,  for  the  following  accounts: 

L.  A.  Stevens,  Capital 

May     1  $10000 

15  *  2000 

L.  A.  Stevens,  Personal 

$100 
100 

$7000 
2000 

$75 
75 

The  credits  to  the  capital  and  to  the  personal  accounts  are  com- 
bined in  the  solution  of  the  problem  and  also  the  debits  to  the  capital 
and  to  the  personal  accounts. 


May  10 
20 

$50  May  15 
50             31 

D.  J.  Frazer,  Capital 
May     1 
15 

May  10 
20 

D.  J.  Frazer,  Personal 

$50  May  15 

60             31 

ADJUSTMENT  ENTRIES  249 

L.  A.  Stevens,  Credit  Interest 

May  1     Interest  on  $10000  for  30  da.  $50.00 

15  "  "        2000    "    16    "  5.33 

15  "  "  100    "    16    "  .27 

31  "  "  100    "      0    a  .00 

Total  credit  interest  $55.60 

L.  A.  Stevens,  Debit  Interest 
May  10     Interest  on  $50  for    21da.  $     .  18 

20  "  "      50    "      11    "  .09 

Total  debit  interest  .  27 

Net  interest  due  him  $55733 

D.  J.  Frazer,  Credit  Interest 

May     1     Interest  on  $7000  for    30  da.  $35.00 

15           "          "      2000    "      16    "  5.33 

15            "          "          75    "      16    "  .20 

31            *          «          75    "        0    "  .00 

Total  credit  interest  $40.53 

D.  J.  Frazer,  Debit  Interest 
May  10     Interest  on  $50  for    21  da.  $     .  18 

20  "  "      60    "      11    "  .11 

Total  debit  interest  .29 

Net  interest  due  him  $40.24 

The  following  entry  would  then  be  made: 

Profit  and  Loss  $95.57 

To  L.  A.  Stevens,  Personal  $55.33 

D.  J.  Frazer,  Personal  40.24 

To  adjust  interest  at  6%. 

If  the  net  profits  were  $780.45  before  the  adjustment  was  made  and 
profits  and  losses  were  to  be  divided  equally,  the  Profit  and  Loss 
account  would  first  be  closed  by  Net  Profit  and  it  would  be  brought 
down  on  the  credit  side  of  the  same  account.  The  entry  for  the  adjust- 
ment of  interest  would  then  be  posted  to  the  debit  side  of  the  Profit 
and  Loss  account.  There  would  then  be  $684.88  to  be  divided  equally. 
Each  partner  would  receive  his  interest  share  plus  $342.44.  Stevens' 
total  share  of  the  profits  would  be  $397.77  and  Frazer's,  $382.68. 

If  the  profits  had  been  divided  equally  without  an  interest  adjust- 
ment, one  partner  would  have  received  $390.23    and  the  other  $390.22. 


250  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Exercise  53.  On  June  8,  there  was  a  cash  shortage  of  $40.  On 
June  12,  it  was  found  that  the  proprietor  had  withdrawn  $40  and  made 
no  record  of  it.      Make  the  necessary  entries  for  both  dates. 

Exercise  54.  On  June  15,  there  was  cash  ''over"  amounting  to 
$37.85.  On  June  18,  it  was  found  that  cash  received  from  C.  D. 
Walters  was  entered  as  $375.50  instead  of  $395.50.  Also  a  cash  sale 
to  J.  A.  Wood  for  $17.85  was  not  entered  at  all.  Make  the  necessary 
entries  for  both  dates. 

Exercise  55.  M.  I.  Kerr  owes  you  $324.75.  He  has  been  declared 
a  bankrupt  and  his  receiver  sends  you  a  check  for*  60^  on  the  dollar. 
Make  the  necessary  entries. 

Exercise  56.  March  8.  You  drew  a  draft  on  P.  L.  Worden  in  favor 
of  M.  A.  Kane,  for  $200,  and  sent  it  to  M.  A.  Kane  to  apply  on  account. 
It  is  now  returned  to  you  dishonored.  Make  the  necessary  entry  now 
if  an  entry  was  made  when  the  draft  was  drawn. 

Exercise  57.  a)  After  closing  the  books,  it  was  found  that  the 
merchandise  inventory  had  been  computed  $100  less  than  it  should 
have  been,  b)  After  closing  the  books,  it  was  found  that  there  was 
unexpired  insurance  that  had  not  been  entered,  amounting  to  $50. 

Make  the  entries  to  adjust  these  mistakes. 

Exercise  58.  A  fire  occurred  in  the  building  occupied  by  the 
Chase  Mfg.  Co.  Merchandise  worth  $7845.60  was  partly  destroyed, 
the  furniture  and  fixtures  were  damaged  to  the  amount  of  $186.50, 
and  the  building  was  damaged  to  the  amount  of  $4500.  Merchandise 
that  was  salable  was  sold  for  $243.75.  The  following  was  received 
from  the  insurance  companies:  for  merchandise,  $6875.80;  for  furniture 
and  fixtures,  $156.75;  and  for  the  loss  to  the  building,  $4500.  There 
was  unexpired  insurance  on  the  books  of  $167.80,  all  of  which,  except 
$23.50,  is  a  loss. 

Make  the  entries  to  adjust  this. 

Exercise  59.  C.  Jones,  D.  Kreeger,  and  G.  Hinton  formed  a 
copartnership  on  June  1,  with  investments  as  follows:  C.  Jones,  $10000; 
D.  Kreeger,  $7500;  and  G.  Hinton,  $6000.  It  is  agreed  that  the 
partners  shall  share  profits  and  losses  equally,  and  that  6%  interest  is 
to  be  allowed  on  all  investments  and  on  all  withdrawals  of  capital. 
On  July  15,  G.  Hinton  invested  $2000  additional.  On  August  20, 
C.  Jones  withdrew  $3000  and  on  October  10,  D.  Kreeger  withdrew  $500. 

Adjust  interest  at  6%  on  December  31.  Use  exact  days  in  com- 
puting the  time.      Make  the  entry  to  adjust  the  interest. 

Exercise  60.  In  the  partnership  of  Dillon  &  Foster,  the  partners 
share  profits  and  losses  equally  and  interest  is  to  be  adjusted  December 
31  at  6%.  The  capital  accounts  show  the  following:  J.  Dillon  invested 
$5000  on  January  1  and  $2000  on  May  15.  He  withdrew  $1000  on  July 
10  and  $500  on  September  15.     F.   E.   Foster  invested  $4000  on  January 


ADJUSTMENT  ENTRIES 


251 


1   and  $2500  on   March  8.     He   withdrew    $500   on   July   10   and   $1200 
on  October  20. 

Adjust  the  interest  on  December  31.     Use  exact  days  in  computing 
the  time.     Make  the  entry  to  adjust  the  interest. 


closing  work,  set  vn,  October  (Concluded) 
Trading  and  Profit  &  Loss  Statements  for  the  month  ending  Oct.  31,  19- 


Returns 

Gross  Sales 

Less  Returns  and  Allowances 
Net  Sales 

Costs 

Inventory,  Oct.  1,  19 — 
Purchases 

Less  Returns  and  Allowances 
Net  Purchases 

Less  Inventory,  Oct.  31,  19 — 
Prime  Cost  of  Goods  Sold 
Freight  In 

Total  Cost  of  Goods  Sold 
Gross  Trading  Profit  Down 

Profits 

Gross  Trading  Profit  Brought  D 
Purchases  Discount 
Commission 
Total  Profit 

Losses 

Selling  Expenses: 

Delivery  Expense 

Advertising  Dr. 

Less  Unexpired 

Traveling  Expenses  Dr. 

Not  Entered 

Salary,  Traveling  Salesman 

Freight  Out 
General  Expenses: 

Expense  Dr. 

Less  Inventory 

Rent 

Salaries 

$9243.60 
102.25 

9875 
112 

60 

40 

9763 

8452 

6136 
9141 

40 
35 

20 

own 

$212.50 
172.00 

15277 
6942 

75 
60 

8335 
117 

15 

80 

95 

1310 

.25 

1310 

142 

37 

25 
80 
50 

1490 

75 

40 

'     93 

125 

23 

75 

60 

150 

40 
50 
90 
80 

75 

55 

$68.90 
25.00 

$85.40 
9.65 

252 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Collection  and  Exchange 

Interest  Dr. 

Interest,  accrued  on  notes  pay. 

Interest,  accrued  on  notes  rec. 

Insurance  Dr. 

Insurance,  unexpired 

Sales  Discount 
Depreciation: 

Of  Real  Estate 

Of  Delivery  Equipment 

Of  Furniture  and  Fixtures 
Total  Losses 
Firm's  Net  Profit 

Distribution : 

J.  Bond's  Net  Interest 
J.  Bond's  Net  Profit 
J.  Bond's  Total 
C.  Lynn's  Net  Interest 
C.  Lynn's  Net  Profit 
C.  Lynn's  Total 


$36.80 
3.60 

6 

38 

10 
68 

97 

12 

3 

55 

25 

45 
50 
50 

880 

$40.40 
2.15 

$120.00 
110.00 

- 

60 

609 

95 

59 
252 

87 
59 

312 
297 

44 
252 

91 

58 

46 

49 

609 

95 

Statement  of  Assets  and  Liabilities,  Oct.  31,  19- 


Assets 


Real  Estate  Cost 

Less  Depreciation 

Furniture  and  Fixtures  Cost 

Less  Depreciation 

Delivery  Equipment  Cost 

Less  Depreciation 

Stocks  and  Bonds  Cost 

Merchandise  Inventory 

Note's  Receivable 

Accounts  Receivable,  per  sales  ledger 

Insurance,  unexpired 

Advertising,  unexpired 

Expense  Inventory 

Interest,  accrued  on  notes  receivable 

Cash 

Total  Assets 


$9750.00 
97.50 


$350.00 

3.50 

$1200.00 

12.00 


9652 
346 

50 
50 

1188 

— 

2375 

80 

6942 

60 

986 

40 

5586 

45 

110 

— 

172 

— 

9 

65 

2 

15 

1086 

40 

28458 

45 


ADJUSTMENT  ENTRIES 


253 


Liabilities 

Notes  Payable 
Accounts  Payable 
Traveling  Expenses,  Accrued 
Interest,  accrued  on  notes  payable 

Total  Liabilities 
Firm's  Net  Worth 

Proof 

J.  Bond's  Investment 

J.  Bond's  Interest  and  Net  Profit 

Less  J.  Bond's  Personal 

J.  Bond's  Net  Worth 

C.  Lynn's  Investment 

C.  Lynn's  Interest  and  Net  Profit 

Less  C.  Lynn's  Personal 
C.  Lynn's  Net  Worth 
Firm's  Net  Worth 


1000 

5994 

90 

25 

— 

3 

60 

7023 

50 

21434 

95 

12000 

312 

46 

12312 

46 

100 

— 

12212 

46 

9000 

— 

297 

49 

9297 

49 

75 

— 

9222 

49 

21434 

95 

10.  Make  Trading  and  Profit  and  Loss  statements.  Use  the  fol- 
lowing inventories  and  other  information  not  found  in  the  books: 

Merchandise  Inventory  $6812.45 

Stocks  and  Bonds,  at  cost 

Coal  and  Stationery,  on  hand  11.75 

Delivery  Supplies,  on  hand  4.20 

Unexpired  Advertising  85.00 

Unexpired  Insurance,  ff  of  the  cost 

Interest,  accrued  on  B.  C.  Deering's  note  .  66 

Depreciation: 

On  Furniture  and  Fixtures  \% 

On  Delivery  Equipment  2% 

On  Warehouse  Equipment  1% 

11.  Make  a  statement  of  Assets  and  Liabilities. 

12.  After  these  statements  have  been  approved  by  your  teacher, 
copy  them  in  your  blanks.    Leave  spaces  for  distribution  and  proof. 

13.  Close  the  accounts  of  the  general  ledger,  except  the  Capital 
and  Personal  accounts  of  the  partners.  In  closing  the  Profit  and  Loss  ac- 
count, write  the  words  Net  Profit  in  red  ink  and  bring  the  amount  below 
the  line  in  black  ink.  This  is  necessary  because  part  of  the  profit 
must   first   be   distributed   as  interest   before  it   can   be   divided  equally. 


254 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


14.  Adjust  interest  between  partners.  To  do  this,  use  both  the 
capital  and  the  personal  accounts  of  the  partners.  Find  the  amount 
due  each  partner  according  to  the  method  given  in  this  Chapter.  Make 
the  necessary  entry  to  transfer  the  amount  due  each  partner  to  his 
personal  account. 

15.  a)  Close  the  Profit  and  Loss  account  in  the  usual  way  after 
you   have   posted   the   entry   to   it   for   the   adjustment   of   interest. 

b)  Close  each  partner's  personal  account  into  his  capital  account. 

c)  Close  each  partner's  capital  account. 

16.  Make  a  proof  trial  balance. 

17.  Submit  all  of  your  books  to  your  teacher  for  correction. 
Exercise  61.     From    the    following    trial    balance    and    inventories, 

make  Trading  and  Profit  and  Loss  statements  and  statement  of  Assets 
and  Liabilities  for  the  month  ending  June  30,  19 — .  The  partners  share 
gains  and  losses  equally. 


Trial  Balance,  June  30, 

19— 

C.  N.  Decker,  Capital 

$12000.00 

E.  P.  Randolph,  Capital 

12000.00 

C.  N.  Decker,  Personal 

$       47.90 

E.  P.  Randolph,  Personal 

53.75 

Real  Estate 

15000.00 

Furniture  and  Fixtures 

265.00 

Delivery  Equipment 

1250.00 

Notes  Receivable 

1200.00 

Accounts  Receivable 

9431.75 

Notes  Payable 

7950.00 

Accounts  Payable 

8972.50 

Purchases 

13786.40 

Sales 

10242.85 

Freight  In 

217.25 

Freight  Out 

56.80 

Sales  Discount 

112.40 

Purchases  Discount 

137.85 

Advertising 

215.00 

Delivery  Expense 

170.00 

Rent 

125.00 

General  Expense 

•    56.25 

» 

Salaries 

220.00 

Insurance 

115.20 

Commission 

35.00 

Cash 

9015.50 
$51338.20 

$51338.20 

ADJUSTMENT  ENTRIES  255 

Inventories  and  other  Information: 

Merchandise  Inventory  $  6572.95 

Expense,  supplies  on  hand  9.35 

Advertising,  unexpired  45.00 

Delivery  Supplies,  on  hand  8.25 

Interest,   accrued  on   Notes  Receivable  1.35 

Insurance,  ■££■  of  the  cost 
Depreciation: 

Real  Estate  \% 

Delivery  Equipment  1% 

Furniture  and  Fixtures  1% 

REVIEW  QUESTIONS 

1.  What  are  the  advantages  of  the  use  of  three  ledgers? 

2.  What  kinds  of  accounts  does  each  of  the  three  ledgers  include? 

3.  a)     What  is  a  controlling  account?      b)    Give  the  meaning  of  each  controll- 
ing account  you  have  used. 

4.  Explain  the  posting  of  the  purchase  book  both  daily  and  monthly. 

5.  Name  the  columns  of  the  cash  book  in  order  and  give  the  daily  and  monthly 
posting. 

6.  Name  the  columns  of  the  journal  in  order  and  give  the  daily  and  monthly 
posting. 

7.  How  do  you  prove  the  sales  ledger? 

8.  How  do  you  prove  the  purchase  ledger? 

9.  Give  the  reasons  for  the  use  of  the  different  special  columns  in  the  cash  book. 

10.  Give  the  reasons  for  the  use  of  the  special  columns  in  the  journal. 

11.  Explain  the  use  of  the  sales  journal. 

12.  Explain  the  duplicate  charge  system  of  handling  sales. 

13.  What  is  the  object  of  the  sales  recapitulation  sheet? 

14.  What  are  the  features  of  a  retail  bill  and  charge  system? 

15.  What  are  the  advantages  of  loose-leaf  ledgers? 

16.  What  should  be  observed  in  opening  up  accounts  in  a  loose-leaf  ledger? 

17.  What  are  the  advantages  and  disadvantages  of  card  ledgers? 

18.  What  kinds  of  businesses  can  use  card  ledgers  to  the  greatest  advantage? 

19.  Explain  the  center-column  ledger,  the  balance  column  ledger,  and  the  self- 
proving  ledger. 

20.  What  are  the  most  common  kinds  of  adjustment  entries? 

21.  How  would  you  correct  an  error  in  debiting  or  crediting  the  wrong  account? 

22.  How  do  you  adjust  "cash  over"  and  "cash  shortage?" 

23.  What  principles  should  be  observed  in  adjusting  errors  made  in  closing  the  books? 

24.  What  entries  should  be  made  when  a  customer  becomes  bankrupt  and  pays 
a  certain  per  cent  of  his  indebtedness? 

25.  Explain  the  principle  of  the  adjusting  of  interest  between  partners  and  the 
entry  to  record  it. 


CHAPTER  XXIX 

WHOLESALE  HARDWARE 

SET  VII 
Transactions  for  November  1-7 

Continue  the  use  of  the  books  in  the  same  way  as  for  October. 
Do  not  forget  to  bring  the  cash  balance  forward  in  both  the  general 
and  Cash  Dr.  columns.    Use  a  new  page  for  the  cash  book. 

November  2.  Receive  a  N.  Y.  draft  of  G.  A.  Evers  &  Co.  for 
invoice  of  October  23.     (Incoming  N.  Y.   Draft) 

The  firm  has  informed  all  customers  that  remittance  must  be  by  bank  draft  or  the  cost  of 
collection  on  local  checks  must  be  added  to  the  check.  For  that  reason,  N.  Y.  drafts  will  be  received 
more  frequently. 

Buy  an  invoice  of  hardware  of  C.  Merton  &  Co.,  New  York, 
amounting  to  $632.45.     Terms:    2/5,   1/10,  n/30. 

Pay  the  rent  for  the  month  of  November. 

Buy  five  tons  coal  of  the  Pennsylvania  Coal  Co.  at  $5.10.  Pay  it 
by  check. 

Pay  a  bill  of  the  Carter  Advertising  Co.  for  printing  trade  circulars, 
$14.50. 

Pay  C.  Inbusch  $2.50  for  addressing  and  mailing  trade  circulars. 

Pay  $6.00  for  stamps  for  mailing  trade  circulars. 

G.  A.  Kennedy,  St.  Louis,  Mo.,  sends  a  N.  Y.  draft  for  invoice  of 
October  22.  Since  the  draft  is  dated  October  21.  the  discount  is 
allowed.     (Incoming  N.  Y.  Draft)     He  orders: 

5  doz.  Pocket  Knives  No.  1321 

6  doz.  Screw  Drivers  No.  302 
8  doz.  Jersey  Vises  No.  114 

Terms:  2/10,  n/30. 

C.  L.  St.  John,  Sedalia,  Mo.,  orders: 
6  doz.  Steel    Axes    No.  40 

4  doz.  Adjustable  Clamps  No.  R225 
10  doz.  Very  Best  Hammers  No.  212 

5  doz.  Tinners'  Mallets  No.  2120 

256 


WHOLESALE  HARDWARE  257 

Terms:  note  for  30  days,  with  interest  at  6%,  for  $150;  balance, 
on  account. 

The  note  is  received  with  the  order. 

Deposit  the  N.  Y.  drafts  on  hand. 

Prove  cash,  make  a  report,  and  post. 

November  8.  Receive  of  C.  G.  Lynch  &  Co.,  a  N.  Y.  draft  for  the 
acceptance  of  October  24.     (Incoming  N.  Y.   Draft) 

Pay  Simmons  Hardware  Co.  $1200,  on  account. 

Receive  a  N.  Y.  draft  from  J.  A.  Rogers  &  Co.,  to  balance  their 
account  for  October.     (Incoming  N.  Y.  Draft) 

Receive  a  N.  Y.  draft  of  H.  A.  Vinton,  on  account,  $150.  (Incom- 
ing N.  Y.  Draft) 

Receive  a  N.  Y.  draft  of  P.  A.  Perry,  for  invoice  of  October  24. 
(Incoming  N.  Y.  Draft) 

H.  I.  Wheeler,  Lima,  Ohio,  has  failed  and  can  pay  only  70^  on  the 
dollar.  Receive  a  N.  Y.  draft  from  his  receiver  for  the  amount.  Make 
two  entries  for  this  transaction. 

Buy  an  invoice  of  saws  of  the  Dexter  Saw  Co.,  Hartford,  Conn., 
amounting  to  $537.20.     Terms:    2/10,  n/30. 

H.  Decker,  City,  orders: 

30  Stanley  Jack  Planes  No.  370 
15  doz.  Boxwood  Rules  No.  172 
10  doz.  Straight  Shears  No.  1044 
15  Steel  Wheelbarrows  No.  1720 

Terms:  2/10,  n/30. 

J.  H.  Harlan,  South  Bend,  Ind.,  orders: 

4  doz.  Bit  Braces  No.  3202 

48  sets  Twist  Drill  Bits  No.  109A 

5  doz.  New  American  Files  No.  878 
8  doz.  Tinners'   Mallets  No.  2120 

Terms:  2/10,  n/30. 

D.  J.  Silber,  Keokuk,  Iowa,  orders: 

6  doz.  Spring  Punches  No.  440 

12  doz.  Dexter  Hand  Saws  No.  605 
8  Platform  Scales  No.  M108 

Terms:  2/10,  n/30. 

Deposit  the  N.  Y.  drafts  on  hand. 

Prove  cash,  make  a  report,  and  post. 

November  4-  The  partners  have  decided  to  sell  the  stocks  and 
bonds  on  hand  and  purchase  a  building  and  lot.  The  bonds  are  sold 
at  96^  and  accrued  interest  after  November  1.  Brokerage  is  charged  for 
selling,  £%. 

Find  the  selling  price  of  the  bonds,  net,  by  multiplying  the  par 
value  of  the  bonds  by  the  net  amount  received  for  each  dollar  of  the 


258  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

bond,  .96f.  Find  the  accrued  interest  on  the  par  value  of  the  bonds 
at  4%. 

Receive  a  check  from  D.  E.  Darrow  &  Co.  for  the  amount.  Make 
two  entries,  one  for  the  cost,  and  the  other  for  the  profit  on  the  bonds 
including  the  interest  accrued.     (Incoming  Check) 

Open  an  account  for  Stocks  and  Bonds  Expense  and  Income. 

The  stock  is  sold  at  108|,  brokerage  £%. 

Receive  a  check  from  C.  Mitchell  &  Co.  for  the  selling  price. 
(Incoming  Check) 

Make  two  entries  for  this  transaction  also. 

Pay  freight  on  incoming  invoices  by  check  in  favor  of  the  Darr 
Transfer  Co.,  $36.55. 

Buy  motor  supplies  of  the' City  Supply  Co-  by  check,  $8.95. 

P.  A.  Perry,  Omaha,  Neb.,  orders: 

24  doz.  Eagle  Compasses  No.  569 
15  doz.  Stanley  Gauges  No.  705 

8  doz.  O.  V.  B.  Hatchets  No.  420 

6  doz.  Try  Squares  No.  712 
Terms:  n/30. 

H.  A.  Vinton,  Kenosha,  Wis.,  orders: 
18  Counter  Scales  No.  507 

25  Step-ladders  No.  670  i 

5  doz.  Coe  Wrenches  No.  640 
Terms:  n/30. 

J.  B.  Mauer  &  Co.,  Sioux  City,  Iowa,  order: 
8  doz.  Very  Best  Chisels  No.  2072 
12  doz.  Very  Best  Hammers  No.  212 

6  doz.  Stanley  Levels  No.  155 
Terms:  2/10,  n/30. 

Deposit  the  two  checks  on  hand. 

Prove  cash,  make  a  report,  and  post. 

November  5.  Receive  a  N.  Y.  draft  of  C.  L.  Norris  &  Co.  for  the 
balance  of  their  account  for  October.     (Incoming  N.   Y.   Draft) 

Receive  a  N.  Y.  draft  of  J.  H.  Harlan  for  invoice  of  October  26. 
(Incoming  N.  Y.  Draft) 

Pay  Cleveland  Tool  Co.  $500  on  account,  and  buy  an  invoice  of 
tools  from  them  amounting  to  $516.85.     Terms:    n/30. 

Pay  the  freight  on  the  invoice  of  tools  by  check  in  favor  of  the 
Nickel  Plate  R.   R.,  $15.85. 

Pay  the  Dexter  Saw  Co.  for  the  invoice  of  October  21. 

D.  J.  Field  &  Co.,  Grand  Rapids,  Mich.,  order: 
6  doz.  Bit  Braces  No.  3202 
72  sets  Twist  Drill  Bits  No.  109A 

Terms:  2/10,  n/30. 


WHOLESALE  HARDWARE  259 

D.  L.  Jackson  &  Co.,  Memphis,  Tenn.,  order: 
12  doz.  Pocket  Knives  No.  1321 

15  Garden  Plows  No!  426 

16  Cross  Cut  Saws  No.  080 

Terms:  note,  at  30  days,  for  $200,  with  interest  at  6%;  balance,  on 
account,  30  da. 

The  note  is  received  with  the  order. 

The  firm  has  bought  the  building  and  lot  located  at  250  N.  Canal 
St.,  of  D.  A.  Paxton  &  Co.,  for  $14750;  $10000  being  the  value  of  the 
building  and  $4750,  of  the  lot. 

By  agreement,  $8000  is  to  be  paid  in  cash  and  a  note  for  one  year 
with  interest  at  6%  given  for  the  balance. 

Make  an  entry  to  record  the  purchase.  Then  make  two  entries  to 
record  the  two  payments. 

Deposit  the  two  N.  Y.  drafts  on  hand. 

Prove  cash,  make  a  report,  and  post. 

November  6.  The  firm  has  contracted  with  the  J.  A.  Manville  Co. 
to  take  over  the  lease  to  the  building  the  firm  is  now  occupying.  The 
transfer  is  to  be  made  November  9.  They  have  given  us  a  check  for 
$85  to  reimburse  us  in  part  for  the  rent  paid  to  December  1. 

November  7.  The  firm  has  received  an  offer  from  the  Houston 
Hardware  Co.  to  buy  the  firm's  business.  They  agree  to  purchase  the 
assets,  cash  excepted,  and  to  assume  the  liabilities  of  the  business  as 
shown  by  a  statement  of  assets  and  liabilities  under  date  of  November  7. 
They  have  agreed,  in  addition,  to  pay  $750  for  the  good  will  of  the  business. 

Their  proposition  has  been  accepted,  with  payment  to  be  made  as 
follows:  Cash,  $10000,  and  a  note  at  three  months,  with  interest  at 
6%    for  the  balance. 

As  bookkeeper,  you  are    required    to    close  the  books,   November  7. 

CLOSING    WORK 

1.  Close  the  books  of  entry  in  the  same  way  as  for  October  and 
post  the  closing  entries. 

2.  Make  a  proof  of  the  sales  ledger. 

3.  Make  a  proof  of  the  purchase  ledger. 

4.  Take  a  trial  balance  of  the  general  ledger. 

5.  Make  Trading  and  Profit  and  Loss  statements.  Use  the  follow- 
ing inventories  and  other  information  not  found  on  the  books: 

Merchandise  Inventory  $6519.40 

Real  Estate,  at  cost 

Unexpired  Advertising  65.  00 

Unexpired  Insurance,  ^  of  the  cost 

Coal  on  hand  26.75 

Delivery  Equipment  Supplies  9.25 


260  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Interest  accrued  on  notes  receivable  and  on  notes  payable 
Depreciation: 

On  Furniture  and  Fixtures,  \%  of  the  cost 
On  Delivery  Equipment,  1%  of  the  cost 
On  Warehouse  Equipment,  \%  of  the  cost 
There  is  a  liability  of  $35  for  traveling  expenses,   and  of  the  travel- 
ing salesman's  salary  for  one-fourth  of  a  month. 

There  is  also  a  liability  for  the  salaries  of  the  bookkeeper,  the  de- 
liveryman,  and  of  the  partners,  each  for  one-fourth  of  a   month. 

6.  Make  a  statement  of  Assets  and  Liabilities. 

7.  Copy  the  statements  in  the  blanks  after  they  have  been  ap- 
proved by  the  teacher.    Leave  spaces  for  distribution  and  proof. 

8.  Close  the  accounts  of  the  general  ledger,  except  the  Capital  and 
Personal  accounts  of  the  partners. 

The  Profit  and  Loss  account  should  be  closed  by  Net  Profit  placed 
in  red  ink  on  the  debit  side  of  the  account  and  brought  below  the  line 
on  the  credit  side  of  the  account  in  black  ink. 

9.  Adjust  interest  between  partners  and  make  the  necessary  entry. 

10.  a)  Close  the  Profit  and  Loss  account  in  the  usual  way  after 
you  have  posted  the  entry  to  it  for  the  adjustment  of  interest. 

b)  Close  the  partners'  personal  accounts  into  their  capital  accounts. 

c)  Close  the  partners'  capital  accounts. 

11.  Make  a  proof  trial  balance  after  closing  the  ledger. 

To  Transfer  a  Business  to  a  Purchaser.  To  transfer  a  business, 
certain  legal  steps  are  necessary  to  make  the  transfer  valid  and  certain 
entries  are  necessary  to  show  the  transfer  and  to  close  the  books. 

To  Transfer  This  Business.  First,  A  contract  of  sale  or  a  bill  of  sale 
should  be  drawn  up,  showing  the  assets  transferred  to  the  new  business, 
the  liabilities  assumed  by  the  new  business,  and  the  terms  of  the  agree- 
ment. It  should  definitely  name  the  contracting  parties,  the  terms  of 
payment,  the  consideration,  and  any  other  agreements  entered  into. 

Second,  The  real  estate  can  be  transferred  only  by  deed,  which 
should  be  made  out  and  signed  and  acknowledged  by  the  partners 
before  a  notary  public. 

Third,  All  notes  receivable  transferred  to  the  new  firm  should  be 
indorsed  by  the  partnership  to  the  new  business. 

The  Entries  Necessary  include  the  entry  to  show  the  sale  of  the 
business,  to  show  the  distribution  of  the  Good  Will,  the  entry  to  show 
the  payment  for  the  purchase  of  the  business,  and  the  entry  to  give 
each  partner  his  share  of  the  business. 

Goodwill.  Good  Will  represents  the  established  trade  of  a  business. 
This  may  include  the  location,  the  standing,  the  business  integrity,  trade 
marks  or  trade  names  built  up  by  the  business  by  advertising,  and  the 
name  of  the  business  itself  or  the  right  to  use  ''Successors  to"  before  the 


WHOLESALE  HARDWARE  261 

name  of  the  old  business.  It  frequently  includes,  also,  a  provision  that 
the  persons  selling  shall  not  engage  in  the  same  kind  of  business  in  a 
certain  locality  for  a  certain  period  of  time. 

Good  Will,  if  rightly  valued,  is  an  asset  and  may  be  included  in  the 
accounts  whenever  an  established  business  is  sold  to  another  business. 
But  it  must  represent  actual  values,  otherwise  it  is  simply  a  means  of  in- 
creasing the  nominal  value  without  an  increase  in  the  assets.  This  is 
frequently  called  watered  stock,  in  the  case  of  a  corporation.  An  en- 
tirely new  business  cannot  have  a  Good  Will. 

Good  Will  is  the  most  permanent  kind  of  an  asset  as  it  cannot  be 
sold  without  selling  the  business.  The  business  may  increase  or  decrease 
but  that  should  not  change  the  value  of  Good  Will.  It  does  not  show  a 
profit  or  a  loss  simply  because  a  business  has  increased  or  decreased  in 
value.  When  a  business  is  sold,  Good  Will  may  show  a  profit  if  more  is 
received  for  it  than  the  book  value  and  a  loss  if  less  is  received  for  it 
than  the  book  value. 

Because  Good  Will  is  such  an  intangible  asset,  many  firms  prefer  to 
write  a  certain  amount  off  each  year.  If  the  Good  Will  is  $5000,  the 
business  may  decide  to  write  it  off  in  ten  years.  Each  year  the  follow- 
ing entry  would  be  made: 

Profit  and  Loss  $500 

To   Good  Will  $500 

To  write  off  -^  of  the  Good  Will. 

At  the  end  of  ten  years,  the  account  would  be  closed. 

Make  the  following  entries  and  close  accounts  as  a  result  of  the 
transfer  of  the  business: 

1.  Since  Good  Will  for  $750  is  included  in  the  purchase  of  the  busi- 
ness, an  entry  must  be  made  to  put  it  on  the  books.  Debit  Good  Will 
for  that  amount  and  credit  each  partner's  Capital  account  for  one-half  of 
that  amount. 

2.  Debit  the  Houston  Hardware  Co.  for  the  assets  of  the  business, 
including  Good  Will  and  excluding  cash,  and  credit  each  of  the  assets  un- 
der the  proper  account* name  for  the  balance  as  shown  on  the  ledger. 
The  explanation  should  be  To  transfer  the  assets  to  the  Houston  Hardware 
Co. 

3.  Each  liability  except  that  to  the  partners  should  be  debited  and 
the  Houston  Hardware  Co*  credited  for  the  sum.  The  explanation  should 
be  To  transfer  the  liabilities  assumed  by  the  Houston  Hardware  Co. 

A.  The  difference  between  the  debits  and  the  credits  to  the  account 
of  the  Houston  Hardware  Co.  is  the  amount  to  be  paid  for  the  business. 
Receive  a  check  for  $10000  and  a  note  at  three  months,  with  interest  at 
6%,  for  the  balance.  Make  an  entry  in  the  journal  for  both  the  check 
and  the  note  received.  Then  check  the  cash  entry  and  enter  it  in  the 
cash  book  and  cheek  it. 


262  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Open  an  account  for  the  Houston  Hardware  Co.  and  post  the  entries 
that  have  been  made. 

5.  By  agreement,  E.  B.  Gordon  has  agreed  to  take  the  note  at  its 
face  value  in  part  for  his  net  worth.      Make  an  entry  to  transfer  it  to  him. 

6.  Give  each,  partner  a  check  for  the  balance  of  his  net  worth. 
These  two  checks  should  exactly  balance  the  cash  book. 

7.  Rule  the  cash  book  and  any  accounts  in  the  ledger  that  have  not 
been  ruled. 

8.  Submit  all  of  your  books  to  your  teacher  for  correction. 

ANALYSIS  OF  RESULTS 

Per  cent  of  Profit  and  of  the  Cost  of  Doing  Business  Based  on  the 
Selling  Price. 

In  Part  II,  the  method  of  computing  the  per  cent  of  the  cost  of  doing  business 
and  the  per  cent  of  net  profit  was  based  on  the  cost  of  the  goods  sold,  frequently 
called  the  turnover.  That  is  a  method  very  commonly  used  and  in  certain  businesses 
is  the  only  one  that  is  used  to  any  extent. 

But  in  many  businesses  the  difficulty  of  ascertaining  the  total  cost,  and  the  fact 
that  selling  expenses  bear  a  closer  relation  to  the  selling  price  than  to  the  cost  price, 
makes  it  advisable  to  compute  both  the  per  cent  of  cost  of  doing  business  and  the  per 
cent  of  profit  on  the  selling  price. 

Other  reasons  for  figuring  profits  and  expenses  on  the  sales  are: 

1.  Total  sales  can  easily  be  found  from  the  books.    Total  cost  is  rarely  shown. 

2.  In  many  businesses,  the  selling  price  is  fixed  by  competition  or  by  trade  agree- 
ment and  it  is  easier  to  base  the  profits  on  a  fixed  amount  rather  than  on  an  indefinite  cost. 

3.  Commissions  for  selling  are  always  based  on  the  selling  price. 

4.  The  ordinary  expenses  of  the  business,  especially  the  selling  expenses,  depend 
to  a  large  extent  on  the  gross  sales. 

In  order  to  use  this  method  to  determine  the  selling  price  or  to  make  comparisons, 
the  business  must  first  ascertain  the  cost  of  doing  business  based  on  sales  by  com- 
paring the  selling  expenses  and  the  general  expense  with  the  gross  sales. 

Problem:  If  the  gross  sales  amount  to  $8000,  the  selling  expenses  are  $800,  and 
the  general  expenses  are  $200,  the  per  cents  would  be  found  as  follows: 

Selling  Expenses,  $800^  Gross  Sales,  $8000  =  .10  or  10%. 

General  Expenses,  $200^  Gross  Sales,  $8000  =  .025  or  2f%. 

These  per  cents  should  be  worked  out  from,  time  to  time  and  comparisons  made 
of  one  fiscal  period  with  another. 

How  to  Find  the  Selling  Price.  To  find  the  selling  price  of  an  article  on  this 
basis,  the  selling  price  must  be  used  as  a  base. 

Using  the  per  cents  given  above,  if  an  article  costs  $12.75,  the  cost  of  doing 
business  is  10%  for  the  selling  expenses,  and  2£%  for  the  general  expenses,  and  the 
profit  is  to  be  15%  on  the  sales,  the  selling  price  would  be  found  as  follows: 

Let    100%  =  The  selling  price 

10%  =  The  selling  expenses 
2£%  =  The  general  expenses 
15%  =  The  profit 

100%-(10%+2£%+15%)  =  72£%,  the  cost  price  of  the  goods. 

$12.75^.725  =  $17.59,  the  selling  price. 

As  this  computing  would  require  a  great  deal  of  work,  tables  have  been  made 
for  finding  the  selling  price  of  an  article  when  the  total  per  cent  of  the  cost  of  doing 
business  and  the  per  cent  of  profits  are  given. 


WHOLESALE  HARDWARE  263 

Exercise  62.  Basing  the  cost  of  doing  business  and  the  profits  on 
the  gross  sales,  work  the  following  problems: 

1.  The  monthly  sales  of.  a  business  were  $3750.  The  cost  of  doing 
business  was  $525. 

a)  Find  the  per  cent  of  cost  of  doing  business. 

b)  If  the  business  wishes  to  make  a  profit  of  20%,  for  what  price 
should  an  article  that  cost  $9.25  be  sold? 

2.  If  the  selling  expenses  are  12%,  the  general  expenses,  5%,  and 
the  business  wishes  to  make  a  profit  of  15%,  at  what  price  should  an 
article  that  cost  $22.50  be  sold? 

3.  The  yearly  sales  of  a  business  were  $38975.  The  selling  ex- 
penses were  $4592.50  and  the  general  expenses  $1875.40. 

a)  Find  the  per  cent  of  selling  expenses. 

b)  Find  the  per  cent  of  the  general  expenses. 

c)  If  the  business  wishes  to  make  a  profit  of  Yl\%,  for  what  price 
should  an  article  that  cost  $43.75  be  sold? 

4.  The  selling  price  of  an  article  is  $18.50.  The  cost  of  doing  busi- 
ness is  12^%  and  the  average  profits  on  sales  is  18%,  what  is  the  first 
cost  of  the  article? 


CHAPTER   XXX 
CLOSING  BY  JOURNAL  ENTRY 


The  method  of  closing  so  far  used  has  been  by  the  ledger  transfer 
method.  By  this  method,  all  inventories  were  entered  in  red  ink  and 
brought  below  on  the  opposite  side  in  black  ink.  All  profits  and  losses 
were  entered  in  red  ink  to  close  and  taken  to  the  opposite  side  of  the 
Profit  and  Loss  account  in  black  ink.  The  net  profit  was  transferred  to 
the  proprietor's  account  by  entering  it  in  red  ink  on  the  debit  side  of  the 
Profit  and  Loss  account  and  transferring  it  to  the  credit  side  of  the 
proprietor's  account. 

This  method  may  be  used  in  a  small  business  if  the  number  of 
nominal  accounts  is  not  large,  but  if  the  business  is  a  large  one  with 
many  nominal  accounts,  the  journal  method  is  a  better  one. 

By  the  Journal  Method,  nothing  that  changes  an  account  is  entered 
in  any  account  without  first  entering  it  in  the  journal  as  a  closing  entry. 
No  red  ink  is  used  except  for  balancing  accounts  and  for  ruling. 
Asset  and  liability  accounts  are  balanced  in  the  same  way  as  before 
by  putting  Balance  in  red  ink  on  the  smaller  side  and  transferring  this 
balance  to  the  opposite  side  in  black  ink.  This  does  not  change  the 
account  but  shows  the  result  of  the  account  in  one  amount. 

How  to  Enter  Inventories.     Inventories  must  be  entered  by  journal 
entry.     The  inventory  of  goods  on  hand  is  entered  by  opening  a  separate 
account  for  Merchandise  Inventory,  as  follows: 
Merchandise  Inventory 
To  Purchases 

This  has  the  same  effect  as  crediting  Purchases  in  red  ink  for  the 
amount  of  the  inventory  and  bringing  the  inventory  below  in  black  ink. 

Since  all  closing  entries  use  the  general  columns  only,  the  entries 
are  all  given  in  the  two-column  journal  form. 

Freight  In  must  be  transferred  to  Purchases  by  the  following  entry: 
Purchases 

To  Freight  In 
Returns  and  Allowances  oto  Purchases  and  on  Sales  must  be  trans- 
ferred to  Sales  and  Purchases  respectively,  as  follows: 

264 


CLOSING  BY  JOURNAL  ENTRY  265 

Returns  and  Allowances  on  Purchases 
To  Purchases 


and 


Sales 

To  Returns  and  Allowances  on  Sales 
The  balance  of  Purchases  must  then  be  transferred  to  Merchandise 
Trading  and  the  balance  of  Sales  to  the  same  account,  as  follows: 
Merchandise  Trading 
To   Purchases 
and 

Sales 

To   Merchandise  Trading 
The  value  of  any  other  asset  or  liability  inventories  must  then  be 
entered.     These   are   inventories   that   have   accrued   or   the   payment   of 
which   is    postponed    to    some    later    date    but    which    must    be    used   in 
closing  the  books  for  the  current  period.     This  is  necessary  in  order  to 
make  each  period  show  the  profits  or  losses  that  belong  to  that  period. 
Some  inventories  of  this  kind  will  be  illustrated.     A  liability  inven- 
tory for  accrued  wages  unpaid  would  be  entered  as  follows: 
Expense  (or   Labor) 

To  Accrued  Liability  Inventories 
or,  if  for  a  freight  bill  unpaid, 

Freight  In 

To  Accrued  Liability  Inventories 
For  accrued  interest  on  notes  payable,  the  entry  would  be: 
Interest 

To  Accrued  Liability  Inventories 
or,  if  for  taxes  accrued,  but  unpaid, 

Real  Estate  Expense  and  Income  (or  Taxes) 
To  Accrued  Liability  Inventories 
To  enter  an  accrued  asset  inventory,  debit  Accrued  Asset  Inventories 
and    credit    the   account   affected.     To   enter   interest    accrued   on   notes 
receivable,  the  entry  would  be: 

Accrued  Asset  Inventories 
To  Interest 
or,  for  commission  earned,  but  unpaid, 
Accrued  Asset  Inventories 
To  Commission 
Such   items   as   unearned   insurance,    unearned   advertising,    and   un- 
earned rent  are  sometimes  entered  in  the  same  way.     But  these  items 
represent  parts  of  amounts  that   have  already  been  entered  but  which 
have  not  been  used  the  current  fiscal  period.     No  entry  is  necessary  to" 
put  them  on  the  books,  but  an  entry  will  be  made  to  take  the  nominal 


266  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

or  used  element  out  of  these  accounts.     This  will  be  illustrated  in  the 
entries  to  follow. 

After  all  inventories  have  been  entered,  it  is  necessary  to  transfer 
all  nominal  elements  from  their  accounts  to  the  Profit  and  Loss  account. 

To   Transfer   Profits.     To   transfer   profits,    debit   the    account    that 
shows  a  profit  and  credit  Profit  and  Loss,  as  follows: 
Merchandise  Trading 
Commission 
Discount  on  Purchases 
To  Profit  and  Loss 

To  Transfer  Losses.  To  transfer  losses,  debit  the  Profit  and  Loss 
account  and  credit  the  accounts  that  show  a  loss,  as  follows: 

Profit  and  Loss 
To  Expense 

Delivery  Expense 

Real  Estate  Expense  and  Income 

Freight  Out 

Interest 

Discount  on  Sales 

Etc. 

To  Transfer  Earned  Items  and  Depreciation.  Where  more  has 
been  charged  to  an  account  than  has  been  used,  or  where  depreciation 
is  to  be  taken  off,  Profit  and  Loss  account  is  debited  and  the  account 
affected  is  credited,  as  follows: 

Profit  and  Loss 

To  Insurance,  expired 
Advertising,  expired 
Rent,  expired 
Real  Estate,  depreciation 
Furniture  and  Fixtures,  depreciation 
Delivery  Equipment,  depreciation 

Although  but  one  debit  or  credit  in  total  is  given  to  the  Profit 
and  Loss  account  in  ea'ch  journal  entry,  each  account  that  shows  a  profit 
or  loss  must  be  shown  in  the  .account,  as  illustrated  on  page  267. 

The  Profit  and  Loss  account,  if  it  shows  a  profit,  is  closed  by  an 
entry  as  follows,  after  the  proper  entry  for  the  adjustment  of  interest 
has  been  made: 

Profit  and  Loss 

To  J.  Dunn,  Personal 
D.  Gardner,  Personal 


CLOSING  BY  JOURNAL  ENTRY 


267 


If  it  shows  a  net  loss,  the  entry  would  be  reversed.  The  personal 
account,  if  the  credit  side  is  the  larger,  is  then  closed  into  the  capita) 
account,  as  follows: 

J.   Dunn,   Personal 

To  J.   Dunn,   Capital 
and, 

D.   Gardner,  Personal 

To  D.  Gardner,   Capital 
If  the  debit   side   of  a    personal   account   is   larger   than   the  credit, 
the  entry  would  be  reversed. 

Profit  and  Loss 


19— 

19 

— 

May 

31 

Expense 

J 

16 

317 

25 

May 

31 

Mdse.  Trading  J 

15 

1072 

10 

31 

Delivery  Ex. 

J 

16 

145 

25 

31 

Commission      J 

15 

112 

50 

31 

Real  Es.Ex.&In. 

J 

16 

140 

— 

31 

Disc,  on  Pur.    J 

15 

136 

40 

31 

Freight  Out 

J 

16 

12 

80 

31 

Interest 

J 

16 

17 

25 

31 

Disc,  on  Sales 

J 

16 

86 

40 

31 

Insurance 

J 

16 

12 

50 

31 

Furn.  and  Fix. 

J 

16 

3 

50 

31 

Delivery  Equip. 

J 

16 

25 

— 

31 

J.  Dunn,  Per. 

J 

16 

280 

53 

31 

D.  Gardner,  Per. 

J 

16 

280 

52 

1321 

— 

1321 

— 

After  these  entries  have  been  made,  nothing  but  assets  and  liabilities 
remain  on  the  books.  All  accounts  that  balance  should  then  be  ruled 
and  all  accounts  should  then  be  balanced  except  those  that  have  but 
one  item  in  them  and  have  not  been  changed  by  the  closing. 

An  account  like  Expense,  with  an  accrued  inventory  for  wages 
unpaid  would  appear  as  follows,  after  closing: 


Expense 


19- 

19— 

« 

May 

31 
31 
31 

Inventory 

C 
J 
J 

15 

8 
8 

216 

175 

27 

25 
50 

May 

31 

To  close             J 

9 

418 

75 

418 

75 

418 

75 

268  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Insurance,  with  unexpired  insurance,  would  be  closed  as  follows: 

Insurance 


19— 


19- 


May 

1 

15 

Balance 

C 
C 

9 
11 

150 
90 

— 

May 

31 

31 

To  close 
Balance 

J 

9 

16 

223 

25 

75 

240 

— 

240 

— 

June 

1 

223 

75 

Proof  Trial  Balance.  The  sum  of  the  debit  balances  remaining  on 
the  books  should  equal  the  sum  of  the  credit  balances  the  same  as  in 
closing  by  ledger  transfer.     This  is  the  proof  trial  balance. 

After    the    closing    has    been    completed,    the    temporary    inventory 
accounts    should    be    closed    by    transferring    the    items    in    them    to    the 
accounts  affected.     For  the    merchandise    inventory,  the  entry  would  be: 
Purchases 

To  Merchandise  Inventory 
For  accrued  asset  inventories,  the  entry  would  be  the  reverse  of  the 
entry  to  close: 
Interest 
Commission 

To  Accrued  Asset  Inventories 
For  accrued  liability  inventories,  the  entry  would  be: 
Accrued  Liability  Inventories 
To  Expense 
Freight  In 
Interest 

Real  Estate  Expense  and  Income  (or  Taxes) 
Etc. 
Auditors  and  accountants  consider  this  form  of  closing  a  much 
better  one  than  the  ledger  transfer  method  because  there  is  an  entry 
on  the  original  books  for  each  inventory  and  for  each  transfer.  These 
can  be  easily  traced  to  the  ledger  by  placing  the  folios  in  the  proper 
columns  of  both  the  journal  and  the  ledger. 

Exercise  63.  Make  journal  entries  to  close  the  books  of  Set  VII, 
October.  Make  a  manuscript  Profit  and  Loss  account  and  post  to  it. 
The  result  should  be  the  same  as  the  result  obtained  by  closing  the 
books  by  ledger  transfer. 

Exercise  64.  Make  journal  entries  to  close  the  books  of  Set  VII, 
November.     Post  to  a  manuscript  Profit  and  Loss  account. 


CLOSING  BY  JOURNAL  ENTRY  269 

REVIEW  QUESTIONS 

1.  Why  do  most  accountants  prefer  closing  the  ledger  by  journal  entry  instead 
of  by  ledger  transfer? 

2.  In  closing  by  journal  entry,  how  is  the  merchandise  inventory  put  on  the 
books? 

3.  What  entry  should  be  made  to  enter  an  accrued  asset  inventory,  such  as, 
accrued  interest  on  notes  receivable,  or  accrued  commission? 

4.  What  entry  should  be  made  to  enter  an  accrued  liability  inventory,  such 
as,  accrued  wages  or  accrued  interest  on  notes  payable? 

5.  How  should  profits  be  closed  into  Profit  and  Loss? 

6.  How  should  losses  be  closed  into  Profit  and  Loss? 

7.  What  entry  should  be  made  to  transfer  net  profit  or  net  loss  to  the  partners' 
accounts? 

8.  How  should  advances  to  traveling  salesmen  be  entered? 

9.  What  entry  should  be  made  when  a  traveling  salesman  reports  his  expenses? 

10.  What  entry  should  be  made  when  the  business  prepays  freight  for  the 
accommodation  of  a  customer? 

11.  How  should  an  entry  to  record  the  prepayment  of  freight  for  a  customer 
be  posted? 

12.  What  entry  should  be  made  when  a  customer  who  has  paid  cash  returns 
part  of  the  goods  and  asks  for  cash  for  it? 

13.  How  should  the  sale  of  stocks  or  bonds  at  a  profit  be  entered?    Why? 

14.  How  should  the  sale  of  stocks  or  bonds  at  a  loss  be  entered?     Why? 

15.  To  what  account  should  a  payment  for  packing  boxes  be  charged?     Why? 

16.  What  entry  should  be  made  when  real  estate  is  purchased  for  cash  and  a 
note? 

17.  In  making  statements  before  closing  the  books,  what  would  you  do  with 
a  charge  on  the  books  for  alterations  to  a  room  that  is  rented  by  the  business? 

18.  In  making  statements  before  closing  the  books,  what  is  done  with  each  of 
the  following  accounts,  and  why:  Freight  In;  Freight  Out;  Returns  and  Allowances 
on  Sales;  Returns  and  Allowances  on  Purchases;  Commission;  Sales  Discount;  Pur- 
chases Discount;    Interest? 

19.  Explain  the  use  of  the  Good  Will  account. 

20.  Wliat  does  the  Good  Will  account  ordinarily  show  when  closing  the  books? 

21.  Under  what  conditions  may  the  Good  Will  account  show  something  else? 
Explain. 

22.  If  a  going  business  increases  in  value,  would  Good  Will  show  a  profit? 

23.  What  entry  should  be  made  on  the  books  of  a  business  to  transfer  the  assets 
and  liabilities  to  a  new  business? 

24.  What  entry  should  be  made  on  the  books  of  the  old  business  to  show  the 
receipt  of  cash  for  the  sale  of  the  business? 

25.  What  entries  should  the  purchaser  of  a  partnership  business  make  for  the 
purchase  and  the  payment  of  it? 


CHAPTER  XXXI 
BOOKS  AND  ACCOUNTS  OF  A  COMMISSION  BUSINESS 


In  Chapter  XXIII  of  Part  II  the  method  of  handling  a  few  ship- 
ments to  be  sold  on  commission  and  the  necessary  entries  in  the  books 
of  both  the  consignor  and  consignee  were  explained.  In  a  large  business 
devoted  entirely  to  sales  on  commission  or  where  the  sales  are  largely 
of  this  character,  the  opening  of  a  separate  shipment  and  consignment 
account  for  each  shipment  would  involve  too  much  work.  The  accounts 
must  be  so  kept  that  account  sales  may  be  easily  and  quickly  rendered 
and  the  books  proved.  This  is  especially  true  in  the  sale  of  fruits, 
vegetables,  and  other  produce  that  is  more  or  less  perishable. 

The  principles  given  in  Chapter  XXIII  apply  to  a  large  commission 
business  as  well  as  to  a  few  accounts  but  a  larger  business  necessitates 
special  books  of  entry  and  record,  special  columns  in  others,  and  special 
accounts. 

Books  of  Entry  and  Record.  The  books  kept  in  a  commission 
business  depend  to  a  large  extent  on  the  size  of  the  business  and  the 
kinds  of  goods  handled.  In  a  commission  business  for  the  sale  of 
produce  of  different  kinds  both  on  commission  and  for  the  business,  the 
following  books  of  entry  may  be  used:  a  receiving  book,  a  combined 
commission  sales  book  and  a  merchandise  sales  book,  a  special  column 
cash  book,  a  special  column  journal,  and  an  account  sales  register.  Three 
ledgers  should  be  used  unless  the  sales  are  mostly  for  cash,  a  general 
ledger,  a  sales   ledger  and  a  consignment  ledger. 

The  Consignment  Ledger.  This  is  an  auxiliary  ledger  in  which  the 
accounts  of  consignments  are  kept.  A  controlling  account  is  kept  for  it 
in  the  general  ledger  called  Consignments. 

Each  consignment  of  goods  is  given  some  distinguishing  mark  such 
as  a  number  or  a  letter  and  number  by  which  it  is  known  and  opened 
up  in  the  consignment  ledger. 

The  Loose-Leaf  Consignment  Ledger  is  a  decided  advantage  as  con- 
signments are  soon  closed  up  and  the  open  consignments  can  by  this 
method  be  kept  separate  from  those  that  are  closed.  The  form  here 
illustrated  is  in  the  form  of  an  account  sales.  It  may  be  made  in 
duplicate  and  one   copy  sent   to   the   consignor   when   account   sales  are 

270 


BOOKS  AND  ACCOUNTS  OF  A  COMMISSION  BUSINESS 
Consignment  Ledgeb 


CHICAGO  COMMISSION  COMPANY 


CONST. 

No._j£i 

To- 


Chicago,  111., 


^2^_Z^_19^=: 


^/Arx^^^rr^^Z^^y. 


For  Merchandise  Received- 


zljL\q. 


271 


Zfatjtz. 


z. 


^^.ro-^S.J?>f-%%>-rs^S 


SALES  CR. 


A. 


L£M£> 


Crr-rs^>^ i  ^13  <T 


Ha. 


A£:: 


u£" 


nJJJy.^f 


-#- 


JUJ2 


^JC£ 


Z_ 


/2jU/sJ?f 


^.32- 


&£ 


£&-. 


La 


li^M&jzL 


.r..ij 


La 


z 


& 


2-C  C* 


dr.. 


ALLOWANCES  DR. 


L 


/JJJy  W7  T^fcrsstS tS:3^\ Jl&£, 


NET  SALES 


zJLa 


a£ 


CHARGES  DR. 


Freight        9,/Z.i 


/2Wr 


Z 


Dgaya^a        a  i/.h  L^L 


as:. 


JL 


Advance      %/0O— 


In 


Storage 


8  3. to 


/  0  d 


Za 


IJL 


Insnranff  S //?. 


In 


Cnmmfwwion  &J2-/7 


Z2- 


La. 


TOTAL  CHARGES 


U&l 


i£f 


Npif.Prnr.ftpirin  hy  Check 


L^C 


.££. 


272 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


rendered,  or  a  copy  may  be  made  of  the  ledger  account  when  account 
sales  are  rendered. 

The  account  is  opened  up  by  transferring  the  items  received  from 
the  receiving  book  to  the  consignment  account.  No  prices  are  specified 
unless  the  consignor  has  fixed  the  minimum  price  at  which  the  goods 
shall  be  sold. 

The  freight,  drayage,  advances  and  other  cash  charges  are  posted  to 
the  consignment  ledger  from  the  cash  book.  The  sales  are  posted  from  the 
commission  sales  book.  When  the  consignment  of  goods  has  been  sold, 
commission  and  other  charges  are  entered  and  the  net  proceeds  found. 

The  Receiving  Book.  This  book  is  a  book  kept  in  the  stock  room 
by  a  clerk.  The  records  in  it  are  usually  make  in  pencil.  At  the  close 
of  the  day,  it  is  turned  over  to  the  bookkeeper.  Frequently  two  receiv- 
ing books  are  used  on  alternate  days,  so  that  the  clerk  can  be  making 
the  entries  in  one  while  the  bookkeeper  is  posting  the  previous  day's 
entries.  The  bookkeeper  daily  transfers  these  records  to  the  consign- 
ment ledger  under  the  proper  consignments.  It  is  here  that  each 
consignment  is  given  some  distinguishing  mark  by  which  it  is  known 
in  the  books. 

Receiving  Book 


DATE 

19— 

F 

CONSIGNOR    AND 
ADDRESS 

CONST. 
NO. 

ARTICLES 

TERMS 

Nov. 

6 

8 

18 
19 

Atlas  Flour  Mills 
Minneapolis,  Minn. 
G.  J.  Payne 
Streator,  111. 

18 
19 

50  bbl.  A.  Flour 
8  cases  Eggs 

Com.  8% 
Com.  5% 

Commission  Sales  Book.  The  sales  book  used  in  a  strictly  com- 
mission business  is  usually  called  a  commission  sales  book.  Where  some 
sales  are  made  for  the  account  of  the  business,  they  are  usually  entered 
in  the  same  book.  It  contains  columns  for  sales  from  consignments 
both  for  cash  and  on  account.  The  cash  sales  are  also  entered  in  the 
cash  book  and  checked  in  both  books.  Sales  of  merchandise  for  the 
account  of  the  business  are  entered  in  a  separate  column. 

Daily  all  sales  on  account  whether  from  consignments  or  from  mer- 
chandise, must  be  posted  to  the  debit  of  the  personal  account  in  the 
sales  ledger  in  the  usual  way.  Each  item  sold  from  consignments  must 
be  posted  to  the  credit  of  the  proper  consignment  account  in  the  con- 
signment ledger  as  shown  by  the  number  of  the  consignment.  Each 
item  should  be  checked  in  the  check  (V)  column  after  it  has  been  posted. 


BOOKS  AND  ACCOUNTS  OF  A  COMMISSION  BUSINESS 


273 


Monthly  the  total  of  the  Accounts  Receivable  column  is  posted  to  the 
debit  of  Accounts  Receivable.  Consignments  is  credited  for  the  total  of 
the  Consignments  on  Account  and  of  the  Consignments  Cash  columns. 
Sales  is  credited  for  the  total  of  the  Merchandise  column.  Before  posting 
totals  the  sum  of  the  first  column  should  equal  the  sum  of  the  last  three 
columns. 


Commission  Sales  Book,  November  28, 

19— 

ACCOUNTS 

CONSIGN- 

CONSIGN- 

CONS T 

EXTEN- 

F 

V 

RECEIVA- 

MENTS 

MENTS 

MDSE. 

NO. 

SIONS 

ABLE 

ON  ACCT. 

CASH 

Forward 

2478 

90 

1673 

70 

318 

25 

486 

95 

9 

C.  J.  Frey,  City 
Terms:  2/10,  n/30 
15  bbl.  S.  Flour 

5.25 

18 

V 

78 

75 

5  bbl.  Cranberries 

5.90 

14 

V 

29 

50 

108 

25 

108 

25 

28 

12 

K.  L.  Meyer,  Evanston 
Terms:  n/30 
200  bu.  Potatoes 
5  cases  Eggs,  180  doz. 

.50 

.28 

15 

V 

100 
50 

40 

8  tubs  Butter,  480  lbs 

.    .32 

20 

V 

153 

60 

304 

— 

204 

— 

100 

— 

30 

V 

F.  E.  Heinz,  City 
Terms:  Cash 
3  bx.  Oranges 
2  bx.  Lemons 

3.20 
3.50 

19 
19 

V 
V 

9 

7 

60 

8 

5  bunches  Bananas 

30 
Accounts  Receivable 

1.70 

8 

50 

25 

10 

16 

60 

8 

50 

2916 

25 

1985 

95 

334 

85 

595 

45 

2916 

25 

12 

To  Consignments 

1985 

95 

12 

Consignments 

334 

85 

15 

Sales 

595 

45 

The  Cash  Book.  The  form  of  the  cash  book  is  similar  to  that  of 
Set  VII.  The  Cash  Receipts  are  entered  and  posted  both  daily  and 
monthly  the  same  as  the  Cash  Receipts  in  Set  VII.  On  the  Cash  Pay- 
ments, no  column  is  kept  for  Accounts  Payable  because  there  are  only 
a  few  payments  on  account  and  no  purchase  ledger  is  used.  But  a 
column  is  kept  for  Consignments  Dr.,  in  which  is  entered  all  payments 
for  the  account  of  consignments.  All  payments  for  freight,  drayage, 
advances,  net  proceeds,  etc.,  are  entered  in  this  column.  Daily  the 
items  are  posted  to  the  proper  consignment  accounts  in  the  consign- 
ment ledger  as  charges.  Monthly  the  total  is  posted  to  the  debit  of 
Consignments  in  the  general  ledger.  The  closing  of  the  cash  book  is 
similar  to  that  of  Set  VII. 


274 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 
Cash  Receipts,  November  25-30,  19 — 


DATE 

F 

ACCOUNT 

EXPLANATION 

GENERAL 

accounts 
rec'ble 

SALES 
DISCT. 

CASH  DR. 

Nov. 

25 
26 
27 
28 
29 
30 
30 

30 
30 

30 

30 

30- 

V 

V 

Forward 

J.  Sieger  &  Co. 

Notes  Receivable 

A.  R.  Stone 

C.  O.  D. 

Notes  Receivable 

Interest 

General 
Accounts  Rec.  Cr. 

Sales  Disc.  Dr. 
Cash  Dr. 

Total  Receipts 
Balance 

Inv.  of  16th,  less  2% 
J.  Bailey's  note  disc. 
On  account 
H.  E.  Lane 
D.  Joy's  note 
30  da.  on  above 

Total 
<< 

u 

u 

In  bank 

8750 
725 

625 
3 

13 

2896 
389 

300 
68 

30 

50 

75 

42 
7 

60 

79 

11603 

381 
725 
300 
68 
625 
3 

70 

71 

75 

13 

10103 

13 

3654 

55 

50 

39 

13707 

29 

10103 
3654 

13 
55 

50 
13707 

39 
29 

13757 

68 

13757 

68 

13707 

29 

13707 

29 

Dec. 

1 

6153 

39 

6153 

39 

Journal.  A  four-column  journal  will  be  used.  No  purchase  book 
will  be  kept  since  there  are  but  few  purchases  of  goods  to  be  sold  for 
the  account  of  the  business.  Instead,  a  Purchases  column  will  be 
kept,  which  will  be  posted  in  total  only.  The  credit  to  the  creditor 
from  whom  the  goods  were  purchased  is  put  in  the  general  ledger  as 
his  account  will  be  opened  up  there.  No  purchase  ledger  is  necessary. 
The  two  credit  columns  are  the  same  as  those  used  in  Set  VII. 


Journal,  November  21,  19 — 

PUR- 
CHASES 
DR. 

GENERAL 
DR. 

F 

ACCOUNTS 

EXPLANATION 

GENERAL 
CR. 

ACCOUNTS 
RECEIVA- 
BLE CR. 

1345 

675 

60 
20 

1582 

425 
500 

05 

V 
11 

12 
10 

7 
5 

14 

V 
V 

8 

Forward 

Purchases 
ToC.D. Dryer,  Chicago.Ill. 

Consignments 
To  Notes  Payable 

Notes  Receivable 
To  D.  G.  Hinz 

Purchases  Dr. 
General  Dr. 
To  General  Cr. 

Accounts  Rec.  Cr. 

23 

Acct.,  30  da. 
25 

Our  note  at  30  da.,with  int- 
erest at  6%  for  Const.  No.  16 

27 

His  note  at  30  da.,  with 
interest  at  6% 

2138 
675 
425 

25 

20 

789 
500 

40 

2020 

80 

2507 

05 

3238 

45 

1289 

40 

2020 

2507 

80 
05 

3238 
1289 

45 
40 

4527 

85 

4527 

85 

BOOKS  AND  ACCOUNTS  OF  A  COMMISSION  BUSINESS 


275 


Cash  Payments,  Novembeb  25-30,  19 — 


■ 

PUR- 

CONSIGN- 

DATE 

F 

ACCOUNT 

EXPLANATION 

GENERAL 

CHASES 

CASH  CR. 

- 

MENTS 

DISCOUNT 

Nov. 

25 

Forward 

987 

15 

4738 

16 

21 

30 

5704 

01 

26 

M.  E.  Dexter 

Inv.  of  16th,  less  2% 

317 

80 

6 

36 

311 

44 

27 

V 

Const.  No.  15 

Sgt.  draft 

200 

— 

200 

— 

27 

Expense 

Stamps 

5 

— 

5 

— 

28 

V 

Const.  No.  12 

Net  proceeds 

414 

25 

414 

25 

29 

Stable  Expense 

1  T.  Hay 

17 

50 

17 

50 

29 

Advertising 

Daily  Post 

25 

80 

25 

80 

30 
30 

V 
V 

Const.  No.  16 
General 

Net  proceeds 
Total 

875 

90 

875 

90 

1353 

25 

6228 

31 

27 

66 

7553 

90 

1353 

25 

30 

Consignments  Dr. 

" 

6228 

31 

30 

Purchases  Disc.  Cr. 

t( 

27 

66 

30 

30 

V 

Cash  Cr. 
Total  Payments 

<< 

7553 

90 

7581 

56 

7581 

56 

7553 

90 

30 

Balance 

In  Bank 

6153 

39 

13707 

29 

1 

| 

Account  Sales  Register.  This  is  a  book  of  entry  and  record  to 
show  the  different  elements  that  enter  into  the  account  sales.  No 
entries  are  made  in  it  until  the  goods  are  sold  and  account  sales  ren- 
dered. The  columns  for  Total  Sales  and  for  Cash  Charges  have  been 
entered  in  the  books  and  posted  from  the  sales  book  and  cash  book 
respectively.  All  other  columns  are  filled  in  from  the  amounts  found 
in  rendering  account  sales.  Each  column  of  Other  Charges  is  posted 
in  total  to  the  debit  of  Consignments  and  to  the  credit  of  the  accounts 
named:    Storage,  Insurance,   Commission. 

The  Net  Proceeds,  Cash  column  is  not  posted  in  total  as  the  amounts 
have  been  entered  in  the  cash  payments  and  posted  from  there  in  total. 
Net  Proceeds,  On  Account  is  posted  daily  to  the  credit  of  the  account 
in  the  general  ledger  and  in  total  to  the  debit  of  Consignments.  Before 
any  posting  in  total  is  done,  the  sum  of  the  Total  Sales  column  should 
be  proved  with  the  sum  of  all  the  other  money  columns. 

The  Consignment  Account.  The  controlling  account  of  Consign- 
ments will  show  a  liability  of  the  amount  owed  consignors  due  to  sales 
made  from  consignments  that  have  not  yet  been  closed  up.  The  Con- 
signment account  should  show  items  from  the  books  of  entry  as  shown 
in  the  illustration  on  page  276. 


276 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Account  Sales 


CONST. 

DATE 

CONSIGNOR 

TOTAL 
NET 

CASH  CHARGES 

19 — 

SALES 

FREIGHT 

DRAYAGE 

ADVANCE 

5 

7 
8 
3 
9 
2 
4 
1 

Mar. 

8 
12 
15 
20 
22 
24 
27 
28 

B.  C.  Chase 
M.  E.  Rowen 
L.  N.  Ely 

C.  J.  Terrill 
J.  A.  Sullivan 
J.  C.  Minn 

D.  E.  Stark 
H.  A.  Roberts 

978 
346 
578 
637 
143 
316 
206 
413 

40 
20 
45 
80 
60 
75 
45 
20 

47 
26 
31 
42 
6 
14 
19 
23 

25 
40 
50 
30 
40 
35 
50 
75 

12 
5 
9 

11 
2 
7 
6 
9 

15 
65 
45 
15 
15 
80 
25 
40 

500 
100 

300 

150 
100 
150 

— 

31 

V 
3620 

85 

V 
211 

45 

V 
64 

— 

V 
1300 

— 

19- 


Consignments 
19— 


Nov. 


Allowance,  No. 
Acceptance,  " 
Allowance,    " 
Acceptance, " 


7J 

5  J 

9J 

10  J 

C 

Storage  A.  S.  R 
Insurance  A.  S.  R 
Commission  A.  S.  R 
N/PAcct.  A.  S.R 
Balance 


4 

15 

60 

Nov. 

30 

4 

100 

— 

30 

5 

6 

50 

5 

200 

— 

11 

3675 

90 

4 

42 

80 

4 

18 

90 

4 

278 

50 

4 

836 

80 

— 

2137 

80 

7312 

30 

Dec. 

1 

Acct. 
Cash 


C.  S. 
C.  S. 


Balance 


6375 
936 


7312 


2137 


80 
50 


30 


30 


To  Prove  the  Consignment  Ledger.  List  the  open  consignments  by 
number.  Find  the  difference  between  the  sales  and  the  charges  of  each  con- 
signment to  date.  The  difference  may  be  a  credit  difference  due  to  an  excess 
of  sales  over  charges  or  a  debit  difference  due  to  an  excess  of  charges  over 
sales.  The  sum  of  the  credit  balances  less  the  sum  of  the  debit  balances 
should  equal  the  balance  of  the  Consignments  account  in  the  general  ledger. 

Consignment  Ledger  Proof,  Nov.  30,  19 — 


Consignment  No.  16 
No.  18 
No.  21 
No.  23 
No.  25 

Consignments  Balance 


42 
158 

2137 
2338 


870 

617 

850 

2338 


50 

15 
60 

25~ 


BOOKS  AND  ACCOUNTS  OF  A  COMMISSION  BUSINESS 


277 


Register 


OTHER  CHARGES 

NET  PROCEEDS 

F. 

ACCOUNT 

TO  BE 
CREDITED 

REMARKS 

STORAGE 

INSURANCE 

COMMISSION 

CASH 

ACCOUNT 

17 

50 

5 

25 

48 

92 

347 

33 

Ck.No.296 

3 

25 

1 

75 

17 

31 

191 

84 

8 

M.  E.  Rowen 

4 

80 

3 

20 

28 

92 

500 

58 

Ck.No.310 

10 

75 

4 

15 

80 

31 

7 

89 
18 

237 
127 

56 
07 

Ck.No.331 
Ck.No.338 

6 

35 

2 

45 

15 

84 

119 

96 

6 

J.  C.  Minn 

1 

45 

10 

32 

68 

93 

Ck.No.345 

7 

85 

3 

15 

20 

66 

198 

39 

Ck.No.352 

(12) 

(13) 

(14) 

V 

(10) 

50 

50 

22 

20 

181 

04 

1479 

86 

311 

80 

Exercise  65.  Draw  forms  for  the  necessary  books  of  entry  and 
make  the  entries  for  the  following  transactions  as  they  should  be  made 
in  the  regular  books  of  entry.  You  should  understand  the  debit  and 
credit  effect  of  each  entry  no  matter  what  book  is  used. 

September  10.     Received  a  consignment  of  50  bbl.  Baldwin  apples  and 
75  bbl.  Greening  apples  from  the  Crane  Commis- 
sion Co.,  Detroit,  Mich. 
10.     Paid  the  freight  on  this  consignment,  $18.65  and  the 
drayage,  $4.50. 

12.  Sold  D.  E.   Cherry,  for  cash,  25  bbl.  Baldwin  apples 

at  $3.05. 

13.  Sold  D.  L.  Kyle,  for    cash,  15    bbl.  Greening  apples 

at  $2.95. 
15.     Sold  M.  E.  Denton  &  Co.,  on  account,  25  bbl.  Baldwin 
apples  at  $3.05  and  35  bbl.  Greening  apples  at$2.98. 

15.  D.    E.    Cherry   returned  one   bbl.    Baldwin  apples  as 

unsalable.     Gave  him  cash  for  the  apples  returned. 

16.  Paid  the  sight  draft  of  the  Crane   Commission   Co., 

on  account  of  the  consignment,  $200. 

17.  Sold    O.    P.    Brady,    on    account,     10    da.,    25    bbl. 

Greening  apples  at  $3. 
17.     Rendered    account    sales    to    the    Crane    Commission 
Co.  The  following    deductions    were    made  at  this 
time:     $2.75  for  storage,    $1.20  for  insurance,  and 
5  %  commission.     Paid  the  net  proceeds  in  cash. 

Exercise  66.  Draw  the  form  for  a  consignment  ledger.  Post  all 
the  items  from  Exercise  65  that  affect  the  consignment  account  to  the 
consignment  ledger.     Close  the  account. 


CHAPTER  XXXII 

A  GENERAL  PRODUCE  AND  COMMISSION  BUSINESS 

SET  VIII 
Transactions  fob  December 

The  Object  of  this  set  is  to  show  the  method  of  keeping  the  books 
of  a  business  that  is  made  up  of  sales  mainly  on  commission  but  with 
a  few  purchases  and  sales  for  the  account  of  business. 

Books  of  Entry.  The  books  of  entry  will  be  the  journal,  cash 
book,  commission  sales  book,  receiving  book,  and  account  sales  register. 
These  books  will  be  used  and  closed  as  explained  in  Chapter  XXXI. 

Three  Ledgers  will  be  used  as  explained  in  the  last  chapter,  a 
general  ledger,  a  sales  ledger,  and  a  loose-leaf  consignment  ledger. 

No  business  papers  will  be  made  out  in  this  set. 

Post  daily. 

Open  accounts  in  the  general  ledger,  three  on  a  page,  in  the  follow- 
ing order: 

Proprietors'  Accounts  •  page  1 

Asset  Accounts  pages  2  and  3 

Liability  Accounts  pages  4  to  6 

No  purchase  ledger  is  kept.  Enter  creditors'  accounts  under  Lia- 
bility Accounts  in  the  general  ledger. 

Nominal  Accounts  pages  7  to  10 

Profit  and  Loss  Account  page  11 

Open  accounts  in  the  sales  ledger,  four  on  a  page,  in  the  order  in 
which  they  occur  in  the  transactions,  beginning  with  page   13. 

December  1.  F.  S.  Godfrey,  C.  E.  Godfrey,  and  J.  I.  Godfrey  have 
this  day  formed  a  copartnership  under  the  firm  name  of  F.  S.  Godfrey 
&  Sons  to  engage  in  a  General  Produce  and  Commission  business. 
F.  S.  Godfrey  invests  cash,  $1500  and  a  store  building  located  at  150 
W.  South  Water  Street,  Chicago,  111.,  valued  at  $4500;  C.  E.  Godfrey 
invests  cash,  $4000;  and  J.  I.  Godfrey  invests  two  horses  and  a  wagon 
valued  at  $475  and  cash,  $1525.  It  is  agreed  that  they  shall  share 
profits  and  losses  in  proportion  to  the  capital  invested.  It  is  also 
agreed  that  the  partners  shall  receive  salaries  per  month  as  follows: 
F.    S.    Godfrey,    $125;     C.    E.    Godfrey,    $90;     J.    I.    Godfrey,    $75.     The 

273 


A  GENERAL  PRODUCE  AND  COMMISSION  BUSINESS  279 

salaries  are  to  be  paid  and  charged  to  the  Salaries  account,  one-half 
on  the  15th  of  each  month  and  the  balance  on  the  last  day  of  each 
month.     No  withdrawals  are  allowed. 

Make  the  necessary  entries  for  the  investments. 

Bought  a  set  of  commission  books  of  the  Jones  Stationery  Co.  for 
cash,  $23.75. 

Bought   office  furniture   for   $56.25   and   a   typewriter  for   $75   cash. 

December  2.     Paid  $5  for  stamps. 

Make  a  memorandum  of  the  hiring  of  the  Student  as  bookkeeper 
at  a  salary  of  $60  per  month,  payable  on  the  15th  and  on  the  last  day 
of  each  month. 

Received  from  the  Star  Mills,  Milwaukee,  a  consignment  of  200  bbl. 
Star  Flour  to  be  sold  on  commission. 

Enter  it  in  the  Receiving  Book  and  post  it  to  the  consignment 
ledger  under  Number  1. 

Received  from  Lewis  Bros.,  Syracuse,  N.  Y.  a  consignment  of  300 
bbl.  Greening  Apples.     (No.  2) 

Paid  the  Dixon  Transfer  Co.  $62.50  for  freight  and  drayage  on  the 
following: 

Consignment  No.  1,  Freight,  $16.25;  Drayage,  $5.00 

Consignment  No.  2,  Freight,  $32.75;  Drayage,  $8.50 

Bought  of  J.  C.  Irwin,  Waupaca,  Wis.,  800  bu.  Potatoes  at  33^. 
Terms:  2/10,  n/30.  ' 

Enter  this  and  all  other  purchases  for  the  account  of  the  business 
in  the  journal.  Four  trading  accounts  will  be  kept:  Purchases,  Freight 
In,  Sales,  and  Merchandise  Trading. 

Paid  the  freight  on  this  purchase  of  potatoes,  $31.40. 

December  3.  Received  from  the  Madison  Creamery  Co.,  Madison, 
Wis.,  a  consignment  of  1000  lb.  Creamery  Butter  and  720  lb.  Ameri- 
can Cream  Cheese.   (No.  3) 

Paid  freight  on  Consignment  No.  3,  $31.75,  and  drayage  $4.25. 

Received  from  D.  G.  Garst,  Beloit,  Wis.,  a  consignment  of  720  doz. 
Eggs,  freight  prepaid.     (No.  4) 

Paid  drayage  on  Consignment  No.  4,  $2.45. 

Sold  Mercer  &  Co.,  City: 
120  bu.  Potatoes  at  45^ 
50  bbl.  Greening  Apples  at  $2.45     (No.  2) 

Terms:  account,  30  da. 

Enter  the  sale  in  the  commission  sales  book.  Place  the  total 
amount  of  the  sale  in  the  first  money  column,  extend  the  amount  of 
the  sale  of  potatoes  to  the  Sales  column,  and  the  amount  of  the  sale 
from  Consignment  No.  2  to  the  Consignments  on  Account  column.  Do 
not  fail  to  place  the  number  of  the  consignment  after  the  sale  of  goods 
from  a  consignment. 


280  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Sold  Hilden  &  Co.,  City: 

45  bbl.  Star   Flour  at  $5.25     (No.  1) 
240  lb.  American   Cream  Cheese  at  14^     (No.  3) 
Terms:  2/10,  n/30. 

Paid     $8.50    for     an     advertisement    in    the     Daily     Press.      Charge 
Advertising. 

Bought  grain  and  hay  for  horse  feed  for  cash,  $36.75. 
Bought  of  C.   L.   Louders  &  Co.,   New  York,  250  bunches  Bananas 
at  $1.35.     Terms:    2/10,  n/30. 

Paid  freight  and  drayage  on  this  purchase  of  bananas,  $12.50. 
In  posting  from  the  commission  sales  book,  the  total  of  the  invoice 
must  be  posted  to  the  debit  of  the  account  in  the  sales  ledger  as  before. 
Each  sale  from  a  consignment  must  be  posted  to  the  credit  of  the 
consignment  in  the  consignment  ledger  under  Sales.  Check  each  item 
in  the  commission  sales  book  as  it  is  posted.  This  must  be  done  each 
day  as  the  commission  sales  book  is  posted. 

December  J+.     Sold   C.  L.  Mock,  Janesville,  Wis.: 
150  bu.  Potatoes  at  44^ 
180  lb.  Butter  at  31^     (No.  3) 
Terms:  2/10,  n/30. 
Sold  J.  C.  Hammer,  City,  for  cash: 

25  bbl.  Greening  Apples  at  $2.42     (No.  2) 
72  lb.  American  Cream  Cheese  at  13f^     (No.  3) 
Received  of  E.   Duncan  &  Co.,   Marshfield,   Wis.,  a  consignment  of 
60  bbl.   Cranberries.      (No.  5) 

Received  of  Dillon  &  Co.,   Missoula,   Montana,  200  boxes  Jonathan 
Apples  and  100  boxes  Western  King  Apples.   (No.  6) 

Paid  the  Dixon  Transfer  Co.  for  freight  and  drayage,  as  follows: 
Consignment  No.  5,  Freight,  $15.75;  drayage,  $5.80 
Consignment  No.  6,  Freight,  $32.45;  drayage,  $7.20 
Took    out    an    insurance    policy    on    the    building    and    contents    as 
follows:     Building,    $3900;     office    furniture,    $100;     and    goods    in    the 
warehouse,    $3000.     Paid   the   premium   for   one   year   at    l-j-%    to    Geo. 
Russell  &  Co. 

Open  an  Insurance  account  for  the  premium  paid. 
December  5.     Sold  Barber  &  Co.,  City: 

50  bbl.  Star  Flour  at  $5.28     (No.  1) 
30  bunches  Bananas  at  $1.65 
140  lb.  American  Cream  Cheese  at  14^     (No.  3) 
Terms:  on  account. 
Sold  D.  J.  Boerger,  City,  for  cash: 
180  doz.  Eggs  at  24^     (No.  4) 
210  lb.  Butter  at  31^     (No.  3) 


A  GENERAL  PRODUCE  AND  COMMISSION  BUSINESS  281 

Sold  H.  A.  Lederer,  City: 

75  bbl.  Star  Flour  at  $5.32     (No.  1) 
225  bu.  Potatoes  at  45^ 
15  bx.  Jonathan  Apples  at  $1.65     (No.  6) 
Terms:  2/10,  n/30. 

Paid   Chas.    Carter  $1.50   for  sorting  and  repacking  20  boxes  Jona- 
than   Apples.      (No.  6)     5    boxes    Jonathan    Apples     from     Consignment 
No.   6   are  found   to   be   defective   and   unsalable.     Make   a   note   of  this 
in  the  consignment  account  in  the  consignment  ledger. 
Paid  $4.74  for  sacks  for  potatoes. 

C.  L.  Mock,  Janesville,  returned  24  lb.  Butter  from  Consignment 
No.  3  as  unsatisfactory.  Give  him  credit  for  it  at  the  selling  price  to 
him.     Refer  to  the  commission  sales  book  for  the  price. 

December  7.  Received  of  C.  L.  Shore  &  Co.,  Jersey  City,  N.  J., 
a  consignment  of  120  bbl.  Sweet  Potatoes.  (No.  7)  The  freight  was 
prepaid. 

Paid  drayage  on  Consignment  No.  7,  $5.75. 

The  bank  presents  a  sight  draft  on  us  for  $150,  drawn  by  Lewis  Bros., 
on  account  of  Consignment  No.  2.     Paid  it. 
Sold  J.  L.  Dalton  &  Co.,  Madison,  Wis.: 
50  bunches  Bananas  at  $1.68 
30  bbl.  Star  Flour  at  $5.30     (No.  1) 
15  bbl.  Cranberries  at  $5.75     (No.  5) 
20  bbl.  Sweet  Potatoes  at  $3.85     (No.  7) 
Terms:   account,  30  da. 
Sold  C.  B.  Felton  &  Co.,  Racine,  Wis.: 
252  doz.  Eggs  at  25^     (No.  4) 
360  lb.  Butter  at  32^     (No.  3) 
120  lb.  American   Cream  Cheese  at  14^     (No.  3) 
Terms:  2/10,  n/30. 

Render  account  sales  to  the  Star  Mills  for  Consignment  No.  1. 
Charge  $2.10  for  insurance,  $3.25  for  storage,  and  10%  commission. 
Remit  the  net  proceeds. 

Before  this  consignment  can  be  closed  up,  all  sales  and  charges  for 
the  day  must  be  posted.  Turn  to  the  commission  sales  book  and  post 
all  the  sales  for  the  day. 

To  Close  Consignments.  1.  All  sales  and  charges  for  the  day  to 
the  consignment  to  be  closed  must  be  posted.  There  are  no  charges 
to  this  consignment  for  this  day,  except  the  charges  on  rendering  account 
sales.  The  sales  from  this  consignment  for  today  must  be  posted 
at  once. 

2.  Check  with  the  books  of  entry  all  charges  and  all  sales  in  the  con- 
signment.    It  is  also  best  to  glance  through  the  check  (V  )  column  of  the 


282  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

commission   sales   book   to   see   that   all   sales   entered  in  it   to   the    con- 
signment have  been  posted. 

3.  Compute  the  commission  on  the  total  sales  less  any  returns  or 
allowances. 

4.  Enter  the  commission  and  any  other  charges,  such  as  storage 
and  insurance. 

5.  Find  the  sum  of  the  charges  and  deduct  that  sum  from  the 
sum  of  the  net  sales.     The  difference  is  the  net  proceeds. 

6.  Enter  in  the  account  sales  register  the  total  sales,  all  the 
charges  already  entered  under  Cash  Charges,  all  the  other  charges 
under  the  proper  headings,  and  find  the  net  proceeds. 

If  the  net  proceeds  are  to  be  paid  in  cash,  place  the  amount  of  the 
net  proceeds  in  the  Net  Proceeds,  Cash  column.  If  the  net  proceeds 
are  to  be  credited  to  the  account  of  the  consignor,  place  the  amount  in 
the  Net  Proceeds,  On  Account  column. 

7.  If  the  net  proceeds  are  to  be  paid  in  cash,  enter  the  payment 
in  the  cash  book  as  a  debit  to  the  proper  consignment  account  in  the 
Consignments  column. 

8.  If  the  net  proceeds  are  to  be  credited  to  the  account  of  the 
consignor,  post  the  net  proceeds  to  the  credit  of  the  consignor's  account 
in  the  general  ledger. 

9.  Transfer  the  ledger  sheet  for  the  consignment  for  which  account 
sales  have  been  rendered  from  Open  Consignments  to  Closed  Consignments. 

Paid   a   sight   draft   on   us   for   $200,    drawn   by    Madison    Creamery 
Co.,  on  account  of  Consignment  No.  3. 
December  8.     Sold  Hilden  &  Co.,  City: 

250  lb.  Creamery  Butter  at  31^     (No.  3) 
148  lb.  American  Cream  Cheese  at  13^     (No.  3) 
25  bx.  Western  King  Apples  at  $1.58     (No.  6) 
Terms:  2/10,  n/30. 
Sold  Chas.  Mixer,  City,  for  cash: 

15  bbl.  Sweet  Potatoes  at  $3.95     (No.  7) 
20  bbl.  Cranberries  at  $5.80     (No.  5) 
12  bunches  Bananas  at  $1.72 
Render  account   sales   to   the   Madison   Creamery   Co.   for   Consign- 
ment   No.    3.     Charge    $2.15    for    storage    and    5%    commission.     Remit 
the  net  proceeds  in  cash. 

Follow  the  details  explained  under  To  Close  Consignments  given  on 
December  7.     Enter  the  net  sales  in  the  Total  Sales  column. 

December  9.  Bought  of  Biller  &  Co.,  Greenville,  Mich.,  500  bu. 
Potatoes  at  36^.    Terms:  2/10,  n/30. 

Paid  freight  on  the  invoice  from  Biller  &  Co.,  $62.45. 
Paid  $14.75  for  repairing  the  delivery  wagon. 


A  GENERAL  PRODUCE  AND  COMMISSION  BUSINESS  283 

Received    of   Star    Mills,    Milwaukee,    another   consignment    of    Star 
Flour  amounting  to  250  bbl.     (No.  8) 

Paid  freight,  $24.25,  and  drayage,  $7.50,  on  Consignment  No.  8. 
Received   of    James    &    Sanford,    Riverside,    Cal.,   a   consignment   of 
50  boxes  Oranges.     (No.  9) 

Paid  freight,  $28.90,  and  drayage,  $3.75,  on  Consignment  No.  9. 
Sold  B.  J.  Petry,  City: 

10  bbl.  Cranberries  at  $5.80     (No.  5) 
50  bx.  Jonathan  Apples  at   $1.68     (No.  6) 
25  bbl.  Greening  Apples  at  $2.55     (No.  2) 
Terms:  account,  30  da. 
Sold  H.  A.  Lederer,  City: 

75  bbl.  Greening  Apples  at  $2.55     (No.  2) 
20  bx.  Western  King  Apples  at  $1.72     (No.  6) 
25  bbl.  Sweet  Potatoes  at  $4.05     (No.  7) 
Terms:  2/10,  n/30. 

December  10.     J.     L.     Dalton     &     Co.     returned    one    barrel    Sweet 
Potatoes  from  Consignment  No.  7  as  Unsalable.     Give  them  credit  for  it. 
Do  not  forget  to  post  this  to  the  proper  consignment  account  in  the 
consignment  ledger. 

Received   of   Mercer   &   Co.,   their   note   for   $150,   payable   30   days 
after  December  6,  with  interest  at  6%,  on  account. 
Sold  Griffin  &  Frost,  South  Bend,  Ind.: 
144  doz.  Eggs  at  26^     (No.  4) 

15  bbl.  Cranberries  at  $5.78     (No.  5) 
250  bu.  Potatoes  at  47j£ 
30  bunches  Bananas  at  $1.70 
Terms:  2/10,  n/30. 
Sold  J.  C.  Hammer,  City,  for  cash: 

12  bbl.  Sweet  Potatoes  at  $3.92     (No.  7) 
25  bbl.  Star  Flour  at  $5.35     (No.  8) 
8  bx.  Oranges  at  $3.25     (No.  9) 
144  doz.  Eggs  at  26^     (No.  4) 
Received  from  the  Bender  Commission   Co.,   Grand   Rapids,    Mich., 
a  consignment  of  50  cases  Canned  Peas;     15  cases   Canned   Corn;    and 
60  cases  Canned  Peaches.     (No.  10) 

Paid  freight,  $38.20,  and  drayage,  $4.35,  on  Consignment  No.  10. 
Also    paid    the    Bender    Commission    Co.'s   sight   draft   for   $200,    on 
account  of  Consignment  No.   10. 

Render    account    sales    to    D.    G.    Garst    for    Consignment    No.    4. 

Charge  storage,  $2.65,  and  commission  5%.    Remit  the  net  proceeds  in  cash. 

Render  account  sales  to  E.  Duncan  &  Co.   for   Consignment  No.  5. 

Charge  storage,  $1.75,  insurance,   $1.95,    and    commission    7J%.     Credit 

the  net  proceeds  to  their  account. 


284  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

December  11.    Paid  the  Broad  Letter  Service  Co.  $7.50  for  circular  letters 
to  be  sent  to  the  trade.     Paid  $5  for  stamps  for  sending  these  circular  letters. 
Received  of  the  Elgin   Creamery   Co.,   Elgin,   111.,   a  consignment  of 
960  lb.   Creamery  Butter.     (No.  11) 

Paid  freight,  $12.40,  and  drayage,  $2.75,  on  Consignment  No.  11. 
Received  of  the  Madison  Creamery  Co.,  Madison,  Wis.,  a  consign- 
ment of  480  lb.  American  Cream  Cheese  and  200  lb.  Swiss  Cheese.  (No.  12) 
Paid  freight,  $4.75,  and  drayage,  $2.25,  on  Consignment  No.  12. 
December  12.  Received  of  C.  L.  Vinton  &  Co.,  Hart,  Mich.,  a 
consignment  of  150  bbl.   Baldwin  Apples.      (No.  13) 

Paid  freight,  $32.85,  and  drayage,  $4.50,  on  Consignment  No.  13. 
Paid  the  following  sight  drafts  through  the  bank: 

For  $150,  in  favor  of  C.  L.  Shore  &  Co.,  for  Consignment  No.  7 
For  $100,  in  favor  of  Dillon  &  Co.,  for  Consignment  No.  6 
For  $200,  in  favor  of  Star  Mills,  for  Consignment  No.  8 
Sold  D.  J.  Boerger,  City,  for  cash: 

10  cases  Canned  Peas  at  $2.15     (No.  10) 
15  cases  Canned  Peaches  at  $2.35     (No.  10) 
60  bbl.  Greening  Apples  at  $2.47     (No.  2) 
Sold  Barber  &  Co.,  City: 

65  bbl.  Greening  Apples  at  $2.50     (No.  2) 
25  bx.  Jonathan  Apples  at  $1.68     (No.  6) 
20  bx.  Western  King  Apples  at  $1.60     (No.  6) 
Terms:  2/10,  n/30. 

Render  account  sales  to  Lewis  &  Bro.  for  Consignment  No.  2. 
Charge  storage,  $5.75,  insurance,  $3.25,  and  commission  6%.  Remit 
the  net  proceeds  in  cash. 

Paid  J.  C.  Irwin  for  invoice  of  the  2d. 

Received  a  check  from  Hilden  &  Co.,  for  invoice  of  the  3d. 
Paid  C.  L.  Louders  &  Co.  for  invoice  of  the  3d. 

December  14-    Received  a  check  from  C.  L.  Mock  for  invoice  of  the  4th. 
Received  of  J.   C.   Bradley,   Carey,   Ohio,  a  consignment  of  300  bu- 
Onions  and  100  crates  Celery.   (No.  14) 

Received  of  D.  G.  Hill  &  Co.,  Olean,  N.  Y.,  a  consignment  of  150  bbl. 
Northern  Spy  Apples.     (No.  15) 

Paid  Central  Transfer  Co.  for  freight  and  drayage,  as  follows: 
Consignment  No.  14,  freight,  $13.25;  drayage,  $2.50 
Consignment  No.  15,  freight,  $15.80;  drayage,  $4.75 
December  15.     Sold  Thiel  &  Co.,   City: 

50  bbl.  Star  Flour  at  $5.40     (No.  8) 
12  bx.  Oranges  at  $3.30     (No.  9) 
15  cases  Canned  Corn  at  $1.95     (No.  10) 
20  cases  Canned  Peaches  at  $2.40     (No.  10) 
Terms:  2/10,  n/30. 


A  GENERAL  PRODUCE  AND  COMMISSION  BUSINESS  285 

Sold  B.  J.  Petry,  City: 

20  bbl.  Sweet  Potatoes  at  $4.10     (No.  7) 

35  bx.  Western  King  Apples  at  $1.56     (No.  6) 

40  bx.  Jonathan  Apples  at  $1.70     (No.  6) 

55  bu.  Potatoes  at  44^ 

25  bunches  Bananas  at  $1.75 
Terms:  note  at  30  da.,  with  interest  at  6%. 

The  note  is  received  with  the  order. 

Received  a  check  of  H.  A.  Lederer,  for  invoice  of  the  5th. 

Received  a  check  of  Barber  &  Co.,  on  account,  $250. 

Paid  each  partner  for  one-half  a  month's  salary. 

Paid  Student  for  one-half  a  month's  salary. 

December  16.     Sold  C.  B.  Felton  &  Co.,  Racine,  Wis.: 

65  bx.  Jonathan  Apples  at  $1.65  (No.  6) 

20  cases  Canned  Peas  at  $2.08     (No.  10) 

25  cases  Canned  Peaches  at  $2.38     (No.  10) 
Terms:  2/10,  n/30. 

Sold  Maerker  &  Co.,  Peoria,  111.: 

15  bx.  Oranges  at  $3.30     (No.  9) 

25  bunches  Bananas  at  $1.75 
240  lb.  Creamery  Butter  at  32^     (No.  11) 

50  lb.  Swiss  Cheese  at  16^     (No.  12) 
Terms:  account  30  da. 

Render  account  sales  to  Dillon  &  Co.  for  consignment  No.  6. 
Charge  insurance,  $1.25,  storage,  $3.85,  and  commission  5%.  Remit 
the  net  proceeds  in  cash. 

December  17.  Accepted  C.  L.  Vinton  &  Co.'s  30-day  draft  for  $150, 
on  account  of  Consignment  No.   13. 

Donated  two  bunches  Bananas  costing  $1.35  per  bunch  to  charity. 

An  account  might  be  opened  up  for  Donations.  Some  prefer  to 
charge  it  direct  to  Profit  and  Loss.  That  is  not  considered  a  good 
plan  as  it  is  better  not  to  charge  payments  of  this  kind  to  the  Profit 
and  Loss  account  but  to  keep  that  account  for  transfers  at  the  end  of 
the  fiscal  period.  It  is  a  form  of  advertising.  You  may  charge  it  to 
the    Advertising   account.     It    must    not    be    entered   in    the    sales    book. 

What  account  should  be  credited?     Why? 

Sold  Evans  &  Co.,  Grand  Haven,  Mich.: 

15  bx.   Oranges  at  $3.35     (No.  9) 

20  cases  Canned  Peas  at  $2.18     (No.  10) 

25  bbl.  Baldwin  Apples  at  $2.58     (No.  13) 
Terms:  2/10,  n/30. 


286  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Sold  Griffin  &  Frost,  South  Bend,  Ind.: 
75  bu.  Onions  at  52j£     (No.  14) 
30  crates  Celery  at  35^     (No.  14) 
40  bbl.  Northern  Spy  Apples  at  $2.45     (No.  15) 
Terms:  2/10,  n/30. 

Received  of  C.  B.  Felton  &  Co.  a  check  for  invoice  of  the  7th. 
December  18.     Received  of  Hilden  &  Co.  a  check  for  invoice  of  the  8th. 
Received  of  H.  A.  Lederer  a  check  for  invoice  of  the  9th. 
Render  account  sales  to  James  &  Sanford   for    Consignment    No.   9. 
Charge    insurance,    90^,    storage,    $1.15,     and    commission    1\%.     Remit 
the  net  proceeds  in  cash. 

Paid  Biller  &  Co.  for  invoice  of  the  9th. 

December  19.     Received   of   Griffin   &   Frost   a   check   for   invoice   of 
the  10th. 

Sold  J.  C.  Hammer,  City,  for  cash: 

180  lb.  American  Cream  Cheese  at  14^     (No.  12) 
40  lb.  Swiss  Cheese  at  17-J-f*     (No.  12) 
180  lb.  Creamery  Butter  at  32-^     (No.  11) 
150  bu.  Potatoes  at  47ff 
Render  account   sales  to   the   Bender   Commission   Co.   for   Consign- 
ment No.   10.     Charge  storage,   $2.45,  insurance,   $1.35,  and  commission 
10%.     Remit  the  net  proceeds  in  cash. 

Received  of  E.   Duncan  &  Co.,   Marshfield,   Wis.,  a  consignment  of 
42  bbl.  Cranberries.     (No.  16) 

Paid  freight,  $14.80,  and  drayage,  $5.15,  on  Consignment  No.  16. 
December  21.     Paid  $2.80  for  shoeing  horses. 
Paid  $9.80  for  office  stationery. 
Sold  Thiel  &  Co.,  City: 

75  bbl.  Star  Flour  at  $5.38     (No.  8) 
150  lb.  American  Cream  Cheese  at  14j£     (No.  12) 
75  lb.  Swiss  Cheese  at  \l\i     (No.  12) 
10  bbl.  Cranberries  at  $5.95     (No.  16) 
Terms:  2/10,  n/30. 

Bought  of  J.  C.  Irwin,  City,  an  invoice  of  250  bu.  Potatoes  at  35j£. 
Terms:  n/30. 

December  22.     Received   of  the  San  Diego  Fruit  Co.,  San  Diego,  Cal., 
a  consignment  of  50  boxes  Oranges  and  25  boxes  Lemons.     (No.  17) 
Paid  freight,  $37.80,  and  drayage,  $5.10,  for  Consignment  No.  17. 
Sold  C.  B.  Felton  &  Co.,  Racine,  Wis.: 
100  bbl.  Star  Flour  at  $5.40     (No.  8) 
150  lb.  American  Cream  Cheese  at  14^     (No.  12) 

35  lb.  Swiss  Cheese  at  17^     (No.  12) 
250  bu.  Potatoes  at  48j£ 
Terms:  2/10,  n/30. 


A  GENERAL  PRODUCE  AND  COMMISSION  BUSINESS  287 

Received  of  Barber  &  Co.  a  check  for  invoice  of  the  12th. 
Received  of  J.  L.  Dalton  &  Co.  a  check  for  $250,  on  account. 
December  23.     Received  of  D.  G.  Garst,  Beloit,  Wis.,  a  consignment 
of  432  dozen  Eggs.      (No.  18) 

Paid  freight,  $7.35,  and  drayage,  $2,  on  Consignment  No.  18. 
Render   account   sales   to   the    Madison   Creamery   Co.   for   Consign- 
ment No.   12.     Charge  storage,   $3.50,  insurance,   $1.75,  and  commission 
5%.     Remit  the  net  proceeds  in  cash. 

Render  account  sales  to  Star  Mills,  Milwaukee,  for  Consignment 
No.  8.  Charge  storage,  $4.20,  insurance,  $2.05,  and  commission  10%. 
Credit  the  net  proceeds  to  the  consignor's  account. 

December  2J+.  Allowed  Maerker  &  ■  Co.  credit  for  80  lb.  Butter 
at.  16^,  as  they  report  that  it  had  to  be  sold  at  a  loss.  Charge  it  to 
Consignment  No.  11. 

Sold  B.  J.  Petry,  City: 

27  bbl.  Sweet  Potatoes  at  $4.05     (No.  7) 
90  bu.  Potatoes  at  48^ 
125  bu.  Onions  at  55^     (No.  14) 
40  crates  Celery  at  38^     (No.  14) 
Terms:  2/10,  n/30. 

December  26.     Paid  Star  Mills  cash,  $500,  and  gave  a  note  at  30  days 
for  $300,  with  interest  at  6%,  on  account. 
Sold  Barber  &  Co.,  City: 

100  bu.  Onions  at  55^     (No.  14) 
30  crates  Celery  at  36^     (No.  14) 
50  bbl.  Baldwin  Apples  at  $2.62     (No.  13) 
25  bbl.  Northern  Spy  Apples  at  $2.50     (No.  15) 
12  bbl.  Cranberries  at  $5.90     (No.  16) 
Terms:  2/10,  n/30. 

December  28.  Render  account  sales  to  C.  P.  Shore  &  Co.  for 
Consignment  No.  7.  Charge  insurance,  $2.10,  storage,  $4.20,  and  com- 
mission 7-J%.     Remit  the  net  proceeds  in  cash. 

Render   account   sales   to   J.    C.    Bradley,   for   Consignment   No.    14. 
Charge  storage,  $1.25,  and  commission  5%.     Remit  the  net  proceeds  in  cash. 
December  29.     The  bank  presents  the  following  sight  drafts  which  we 
have  paid: 

For  $150,  in  favor  of  Elgin  Creamery  Co.,  for  Consignment  No.  11 
For  $100,  in  favor  of  D.  G.  Hill  &  Co.,  for  Consignment  No.  15 
For  $100,  in  favor  of  E.  Duncan  &  Co.,  for  Consignment  No.  16 
December  80.     Received  of  Theil  &  Co.  a  check  for  invoice  of  the  21st. 
Sold  D.  J.  Boerger,  City,  for  cash: 

120  lb.  Creamery  Butter  at  32^     (No.  11) 
5  bx.  Lemons  at  $4.10     (No.  17) 
15  bx.  Oranges  at  $3.30     (No.  17) 
15  bunches  Bananas  at  $1.80- 


288  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Sold  D.  Evans  &  Co.,  Grand  Haven,  Mich.: 

50  bbl.  Northern  Spy  Apples  at  $2.55     (No.  15) 
25  bbl.  Baldwin  Apples  at  $2.65     (No.  13) 
180  doz.  Eggs  at  24^     (No.   18) 
20  bbl.  Cranberries  at  $5.90     (No.  16) 
Terms:  2/10,  n/30. 

December  81.  Render  account  sales  to  E.  Duncan  &  Co:,  for  Con- 
signment No.  16.  Charge  storage,  $2.85,  insurance,  $1.35,  and  commission 
5%.     Remit   the   net   proceeds   in   cash. 

Paid  the  salaries  for  one-half  a  month. 

CLOSING    WORK 

1.  Find  the  total  of  each  amount  column  of  the  commission  sales  book. 
Prove  the  total  of  the  Accounts  Receivable  column  with  the  sum  of  the 
totals  of  the  three  distributive  columns  following.  Close  the  commission 
sales  book  like  the  model  in  Chapter  XXXI.     Post  the  totals. 

2.  Find  the  totals  of  each  column  of  the  cash  book.  Prove  each  side 
of  the  cash  book.  Close  the  cash  book  like  the  model  in  Chapter  XXXI. 
Post  the  totals. 

3.  Close  the  journal  like  the  model  in  Chapter  XXXI.     Post  the  totals. 

4.  Find  the  sum  of  each  amount  column  of  the  accounts  sales  register. 
Prove  the  total  of  the  Total  Sales  column  with  the  sum  of  the  other  amount 
columns.  Close  the  account  sales  register  like  the  model  in  Chapter  XXXI. 
Post  the  totals  of  each  column  under  Other  Charges  and  the  total  of  the  Net 
Proceeds  on  Account  column  to  the  debit  of  Consignments.  Credit  the  total 
of  each  column  under  Other  Charges.     Do  not  post  the  other  totals. 

5.  Make  a  proof  of  the  sales  ledger  in  the  usual  way. 

6.  Make  a  proof  of  the  consignment  ledger.  To  do  this,  list  the  open 
consignments  by  number  and  balances.  To  find  the  balance  of  a  consign- 
ment, find  the  difference  between  the  total  sales  to  date  and  the  charges  and 
allowances.  The  difference  may  be  either  a  debit  or  a  credit  difference. 
The  sum  of  the  credit  balances  less  the  sum  of  the  debit  balances  should 
equal  the  balance  of  the  Consignments  account. 

7.  Take  a  trial  balance  of  the  general  ledger. 

8.  Make  Trading  and  Profit  and  Loss  statements.  Use  the  following 
information  in  addition  to  the  information  to  be  obtained  from  the  ledger: 

Inventories: 
Merchandise  Inventory: 

260   bu.   Potatoes  at  35^ 
61  bunches  Bananas  at  $1.35 
Stable  Supplies,  on  hand,  $6.75 
Expense  Supplies,  on  hand,  $5.25 

The  business  owes  a  coal  bill  amounting  to  $15.75,  which  has  been  in 
dispute.  The  amount  has  now  been  agreed  upon.  Use  it  as  a  liability 
inventory. 


A  GENERAL  PRODUCE  AND  COMMISSION  BUSINESS 


289 


Compute  interest  on  two  notes  receivable  bearing  interest  for  the 
expired  time.     Compute  interest  on  one  note  payable  for  the  expired  time. 

Insurance  unexpired,   $81.15 

Commission  earned  on  open  consignments:  5%  of  the  net  sales  on  all 
except  Consignment  No.   15,  8%  on  Consignment  No.   15 

Storage  earned  on  open  consignments,  $3.10 

Depreciation  on  Horse  and  Wagon,  2% 

Depreciation  on  Furniture  and  Fixtures,  1  % 

Depreciation  on  Real  Estate,  \% 

9.  Make  a  balance  sheet.  The  balance  sheet  shows  the  same  results 
as  are  shown  by  the  statement  of  Assets  and  Liabilities,  except  in  a  different 
form.  The  balance  sheet  is  usually  made  out  by  the  accountant  after  the 
ledger  is  closed,  but  it  is  advisable  for  the  student  to  make  it  out  first,  in 
order  to  prove  up  his  work  before  closing  the  ledger. 

In  the  balance  sheet  the  assets  are  listed  to  the  left  and  the  liabilities 
to  the  right  in  the  form  of  a  balanced  statement.  The  assets  should  be 
listed  in  a  definite  order  either  beginning  with  the  fixed  or  permanent  assets 
and  ending  with  Cash  or  in  the  reverse  order.  In  the  same  way  the  lia- 
bilities should  begin  with  the  capital  accounts  and  end  with  the  least  per- 
manent liability  or  in  the  reverse  order. 

In  making  the  balance  sheet,  use  the  following  form: 


Balance 

Sheet, 

December  31,   19 — 

Assets: 

Liabilities: 

Real  Estate: 

Chas.  Black,  Capital 

12715  25 

Cost                    $12000.00 

James  Orton,  Capital 

12672 

50 

Depreciation,!  %     120.00 

11880 

— 

Notes  Payable 
Accounts  Payable 

4500 

8257 

— 

Furniture  and  Fixtures: 

75 

Cost                        $225.00 

Salaries,  Unpaid 

27 

50 

Depreciation,  2%       4.50 

220 
6178 

50 
90 

Interest,  Accrued 

3 

80 

Merchandise  Inventory 

Notes  Receivable 

5117 

85 

Accounts  Receivable 

9178 

40 

Advertising,  Unused 

75 

— 

Insurance,  Unexpired 

24 

75 

Cash 

5501 

40 

38176 

80 

38176 

80 

Make  journal  entries  to  close  the  ledger,  and  post  them: 

a)  To  put  the  inventory  of  merchandise  on  the  books.  Open  a 
Merchandise  Inventory  account. 

b)  To  put  the  accrued  asset  inventories  of  interest  on  notes  receivable, 
and  commission  and  storage  earned  in  the  proper  accounts.  Debit  Accrued 
Asset  Inventories. 


290  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

c)  To  put  the  accrued  liability  inventories  of  expense  and  interest 
on  notes  payable  in  the  respective  accounts.  Credit  Accrued  Liability 
Inventories. 

d)  To  close  the  trading  accounts  into  Merchandise  Trading. 

e)  To  close  Merchandise  Trading  account  into  Profit  and  Loss. 

f)  To  close  the  profits  in  the  Profit  and  Loss  section  into  Profit 
and  Loss. 

g)  To  close  the  losses  in  the  Profit  and  Loss  section  into  Profit  and 
Loss. 

h)  To  close  the  balance  of  the  Profit  and  Loss  account  into  the 
partners'  capital  accounts.  The  balances  are  closed  into  the  partners' 
capital  accounts  because  no  personal  accounts  are  necessary  in  this  set. 

11.  Rule   each   account   that   balances. 

12.  Balance  all  other  accounts  except  those  that  have  but  one  item 
in  them. 

13.  Compare  each  account  after  closing  with  the  amount  of  that  ac- 
count in  the  balance  sheet  you  have  made.     The  amounts  should  agree. 

14.  Copy  the  Trading  and  Profit  and  Loss  statements  and  the  Bal- 
ance Sheet  in  your  books. 

15.  Submit    all   your   books   to   your   teacher   for    correction. 
Exercise    67.     Draw    forms    for   the    necessary    books    of    entry   and 

make    the    entries    for    the    following    transactions: 

August  1.  Received  of  the  Mason  Commission  Co.,  Davenport, 
Iowa,  a  consignment  of  36  cases  eggs,  36  doz.  each,  to 
be  sold  on  commission. 

2.  Paid  freight   on  this  consignment,   $10.65,   and   drayage, 

$3.50. 

3.  Sold  12  cases  eggs  at  29^  a  dozen  to  M.  E.  Sargent  for 

cash. 

5.     Sold  8  cases  eggs  at  30^  a  dozen  to  J.   A.    Murray,   on 

account. 
7.     Paid  the  sight  draft  of  the   Mason   Commission  Co.,  for 

$100. 
9.     J.    A.    Murray  returned  one    case    of    eggs    as    unsalable. 

Gave  him  credit  for  them. 
10.     Sold    10  cases   eggs    at    28^    a   dozen   to  M.   I.  Long,  on 

account,   10  days. 

12.  Sold  6  cases  eggs  at    31^    a    dozen  to  J.   B.   Marvin    for 

cash. 

13.  Rendered    account    sales.     Charged   the   following   items 

in  addition  to  those  already  entered:  Insurance,  $1.42, 
storage,  2^  per  case  per  day,  and  commission,  5%. 
Credited  the  net  proceeds  to  their  account. 


A  GENERAL  PRODUCE  AND  COMMISSION  BUSINESS 


291 


Exercise  68.  a)  Draw  the  form  of  a  consignment  ledger  and  post 
to  it  the  transactions  of  Exercise  67  that  affect  the  consignment  account. 

b)  Find  the  net  proceeds. 

c)  Make    the    entries    in    journal    form    for    the    transactions    on 
August   13  to  show  the  debit  and  credit  effect  of  the  transactions. 

Exercise  69.  You  hold  C.  L.  Colby's  90-day  note  for  $750  and 
their  account  shows  a  balance  of  $312.25.  He  is  bankrupt  and,  with 
other  creditors,  you  accept  payment  at  65  cents  on  the  dollar. 
A  check  is  received   on   that   basis.     Make   the   necessary  entries. 

Exercise  70.  On  March  10,  Townsend  &  Co.  bought  50  shares  of 
First  National  Bank  stock,  of  a  par  value  of  $100  each,  at  125|,  broker- 
age, \%.  On  April  1,  a  dividend  of  2%  was  received  on  the  stock. 
On  May  15,  30  shares  of  First  National  Bank  stock  were  sold  at  127J, 
less  J  %  brokerage.  On  May  20,  20  shares  of  First  National  Bank  stock 
were  sold  at  124f,  less  brokerage,  \%.  Make  the  necessary  entries  for 
these  transactions  and  show  the  ledger  accounts  closed  up. 

Exercise  71.  From  the  following  mixed  Merchandise  account  and 
an  inventory  of  $5876.15  make  four  trading  accounts  and  show  each 
one    closed,    under    date    of    March    31. 


MERCHANDISE 

$3685 . 20     Jan. 


12  Returned  Goods    $     21.40 

31  Sales  4137.90 

Feb.     8  Freight  Rebate  3.25 

12  Damaged  Goods  13.80 

28  Sales  3147.90 

Mar.     6  Rebate  on  Goods        18.75 

12  Returned  Goods  50.80 

31  Sales  5080.75 


Jan.      1  Inventory 

8  Packing  Boxes  34.50 

14  Returned  Goods  17.20 

15  Freight  56.80 
31  Purchases  5375.40 

Feb.    12  Rebate  on  Goods  18.90 

15  Freight  78.40 

28  Purchases  3142.75 

Mar.    8  Damaged  Goods  8.95 

12  Freight  32.90 

17  Packing  Barrels  7.25 

31  Freight  12.40 

31  Purchases  4152.80 

Exercise  72.  J.  E.  Jackson  and  M.  L.  Elliot  are  engaged  in  a 
partnership  business  under  the  firm  name  of  J.  E.  Jackson  &  Co. 
On  January  1,  J.  E.  Jackson  invested  $8000  and  M.  L.  Elliot,  $6000. 
J.  E.  Jackson's  personal  account  shows  a  credit  of  $75  on  January  15 
and  of  $75  on  January  31.  M.  E.  Elliot's  personal  account  shows  a 
credit  of  $60  on  January  15  and  of  $60  on  January  31.  On  January 
10,  J.  E.  Jackson  withdrew  $32  and  on  January  20,  $25.  On  January 
8,  M.  E.  Elliot  withdrew  $40  and  on  January  22,  $15.  Adjust  interest 
at  6%,  under  date  of  January  31. 


292  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

REVIEW  QUESTIONS 

1.  What  are  the  advantages  of  a  loose-leaf  consignment  ledger? 

2.  What  items  in  the  consignment  ledger  are  debits  and  which  credits? 

3.  Describe  the  receiving  book.     How  are  the  items  in  it  transferred? 

4.  Give  the  columns  of  the  commission  sales  book  and  tell  how  each  is  posted 
daily  and  monthly. 

5.  In  posting  the  commission  sales  book,  what  should  be  done  with  each  item 
sold  from  a  consignment? 

6.  Why  is  a  column  for  consignments  kept  on  the  Cash  Payments?     How  is 
it  posted? 

7.  How  are  purchases  of  merchandise  entered  in  this  set? 

8.  Give  the  closing  entry  for  the  journal. 

9.  What  is  the  object  of  the  accounts  sales  register? 

10.  What  columns  of  the  account  sales  register  are  posted  and  why? 

11.  How  do  you  prove  the  consignment  ledger? 

12.  What  is  meant  by  the  net  proceeds  of  a  consignment? 

13.  How  is  an  allowance  to  a  customer  for  a  sale  entered?     How  is  it  posted? 

14.  What  entry  is  made  when  the  business  pays  a  draft  on  account  of  a  con- 
signment? 

15.  WThat  entry  is  made  when  the  business  accepts  a  draft  on  account  of  a 
consignment? 

16.  What  is  the  meaning  of  an  open  consignment  with  the  debit  side  the  larger? 

17.  Give  the  steps  necessary  to  close  a  consignment  and  render  account  sales. 

18.  Make  entries  in  journal  form  to  show  the  closing  of  a  consignment. 

19.  What  entry  is  made  if  the  net  proceeds  of  a  consignment  are  paid  in  cash? 

20.  What  would  be  the  entry  in  journal  form  to  show  net  proceeds  on  account? 

MISCELLANEOUS  QUESTIONS  AND  PROBLEMS 

1.  A  firm  is  in  the  retail  implement  business  and  receives  many 
notes  in  payment  of  sales.  It  discounts  all  of  these  notes  at  once.  How 
would  you  modify  your  books  of  entry  so  as  to  give  the  necessary  in- 
formation  with  less  work? 

2.  In  the  firm  of  Walker  &  Co.,  J.  C.  Walker's  capital  is  $8000 
and  M.  E.  Miller's  capital  is  $6000.  They  share  profits  and  losses 
equally.  They  agree  to  take  in  C.  L.  Frost  as  a  third  partner  on  the 
payment  of  $8000,  $2000  of  which  is  paid  for  the  good  will  of  the  busi- 
ness.    What  entries  should  be  made? 

3.  Two  persons  exchange  each  other's  notes  for  $2000.  What 
would  probably  be  the  object  of  such  a  transaction?  What  entry  would 
be  made  on  the  books  of  each? 

4.  On  accepting  a  position  as  bookkeeper  you  find  that  the-  cash  is 
short  $100.  What  methods  would  you  take  to  find  the  shortage?  If 
it  could  not  be  found,  what  entry  would  you  make  with  the  consent  of 
the  proprietor? 


A  GENERAL  PRODUCE  AND  COMMISSION  BUSINESS  293 

5.  J.  A.  West  began  business  with  a  capital  of  $7500.  During  the 
year  he  withdrew  $1250.  At  the  end  of  the  year  a  statement  of  assets 
and  liabilities  showed  assets  of  $9375  and  liabilities  of  $15785.  Has  he 
lost    or   gained,    and   how   much?     Show   his   capital   account   closed   up. 

6.  Under  what  circumstances  would  it  be  advisable  to  keep  more 
than  one  Sales  account?  What  changes  would  you  make  in  the  books  of 
entry  if  you  did? 

7.  An  auditor  found,  in  auditing  the  books  of  a  business  after  it 
had  been  closed,  that  an  inventory  of  $4750  had  been  entered  as  $5750. 
Unpaid  wages  accrued  of  $40  had  not  been  entered  and  commission 
earned  by  the  business  amounting  to  $25  had  not  been  entered.  How 
would  you  correct  the  mistakes? 

8.  A,  the  owner  of  a  store  building,  used  by  his  business,  wishes 
his  books  to  show  that  his  expense  for  rent  earned  by  the  building  each 
month  is   $150.     How  should   he  show  this   on   his   books? 

9.  A  check  for  $150,  which  you  received  from  C.  A.  Stockton  and 
credited  to  his  account  is  returned  marked  "No  funds."  What  entry 
would  you  make? 

10.  A  business  borrows  $5000  from  a  bank  on  its  note  and  gives  as 
collateral  security  eight  Illinois  Central  $1000  bonds.  What  entry  and 
records  should  be  made? 

11.  The  books  of  a  business  have  been  destroyed  by  fire.  From 
card  records  it  is  found  that  at  the  time  of  making  the  last  statement, 
the  goods  on  hand  amounted  to  $7385,  and  that  there  was  bought  during 
this  time  goods  amounting  to  $7510.  From  these  card  records  it  was 
also  found  that  there  was  on  hand  at  the  time  of  the  fire  an  inventory 
of  $5480.  The  insurance  company  paid  $4275  for  the  merchandise 
destroyed.  Sales  were  made  at  a  profit  of  20%  on  the  sales.  Does  the 
Merchandise  Trading  account  show  a  profit  or  a  loss  and  how  much? 

12.  A  note  of  H.  A.  Faber,  for  $500,  which  Brown  &  Co.  had  dis- 
counted at  the  bank  is  protested  for  non-payment.  As  indorser,  Brown 
&  Co.  must  pay  the  face  of  the  note,  the  interest  at  6%  for  90  days, 
and   the   protest   fees,    50^.     What    would   the   entry   be? 


PART  IV 


CHAPTER  XXXIII 
CORPORATIONS 


The  Supreme  Court  of  the  United  States  has  defined  a  corporation 
as  "an  association  of  individuals  united  for  some  common  purpose  and 
permitted  by  law  to  use  a  common  name,  and  to  change  its  members 
without  a  dissolution  of  the  association."  In  the  famous  Dartmouth 
case,  Chief  Justice  Marshall  described  a  corporation  as  an  "artificial 
being,   intangible,   invisible,   and  existing  only  in   contemplation   of  law." 

These  definitions  are  legal  and  technical.  For  our  purpose,  a 
simpler  definition  is  better.  A  Corporation  is  an  association  of  indi- 
viduals formed  and  united  by  statute  into  one  body  and  authorized 
to  act  as  a  single  individual.  The  individuals  that  form  a  corporation 
are  called  stockholders. 

Advantages  of  Corporate  Organization.  Corporations  possess  cer- 
tain advantages  over  partnerships  which  far  outweigh  the  disadvantages 
of  the  corporate  form.  The  principal  advantages  of  corporate  organiza- 
tion are  as  follows: 

1.  A  corporation  has  continuous  existence  and  is  not  affected  by 
the  death  or  withdrawal  of  a  member. 

2.  A  corporation  is  a  legal  entity  that  can  make  contracts,  hold 
title  to  property,  and  sue  in  its  own  name. 

3.  A  stockholder  may  transfer  his  interest  or  pledge  it  without 
the  consent  of  the  other  stockholders. 

4.  The  liability  of  stockholders  is  limited  to  the  par  value  of 
their  stock,  except  in  the  case  of  stockholders  of  national  banks  and 
most  state  banks,  in  which  a  double  liability  is  enforced. 

5.  The  stockholders  of  a  corporation  are  not  liable  for  the  unau- 
thorized acts  of  other  stockholders. 

6.  Ease  of  management  is  another  advantage  of  the  corporate 
form. 

7.  It  is  easier  for  a  corporation  to  raise  a  large  capital  and  to 
borrow  money  than  it  is  for  a  partnership. 

Disadvantages  of  Corporate  Organization.  The  principal  disad- 
vantages of  the  corporate  form  are  as  follows: 

1.     A    corporation    must    have    permission    from    the    state    and    is 

294 


CORPORATIONS  295 

limited   as   to   the   business   it   conducts,    while   a   partnership   is   formed 
•by  agreement  and  is  not  limited  as  to  its  business. 

2.  A  corporation  must  make  certain  reports  to  the  state  at  regu- 
lar intervals  which  individuals  and  partnerships  need  not  make. 

3.  It  is  often  difficult  to  get  the  members  of  a  corporation  together 
to  act  in  an  emergency. 

4.  A  corporation  may  be  subject  to  certain  taxes  to  which  indi- 
viduals and  partnerships  are  not  subject. 

5.  The  business  of  certain  corporations  is  restricted  and  supervised 
by  the  state  even  to  the  extent,  in  some  states,  of  prescribing  rates 
and  supervising  the  issue  of  bonds.  This  is  especially  true  of  such  cor- 
porations as  transportation  companies,  water,  gas,  electric  light  and  power 
companies,  and  telephone  companies.  These  are  usually  called  public  ser- 
vice corporations. 

Before  explaining  the  organization  of  corporations  certain  terms 
must    be  defined. 

A  Charter  is  a  certificate  from  a  state  authorizing  a  corporation 
to  begin  business,  and  together  with  the  corporate  laws  of  the  state 
restricts  the  business  of  the  corporation. 

The  Capital  Stock  of  a  corporation  is  the  amount  of  stock  author- 
ized by  the  charter.  It  is  divided  into  a  certain  number  of  divisions 
called  shares.  Each  share  is  worth  on  its  face  the  amount  represented 
by  the  amount  of  the  capital  stock  divided  by  the  number  of  shares. 
This  is  called  the  par  value  of  a  share  of  stock.  The  par  value  of 
most  shares  of  stock  is  $100.  That  is,  if  a  corporation  is  organized 
with  a  capital  stock  of  $100,000,  it  is  divided  into  1,000  shares  with  a 
par  value  of  $100  per  share. 

Organization.  Before  an  association  of  men  can  do  business  as 
a  corporation  they  must  obtain  a  charter  from  some  state.  To  do 
this,  they  must  follow  the  law  of  the  state  in  which  they  wish  to  be 
incorporated.  A  corporation  may  be  incorporated  in  one  state  and  do 
business  in  other  states  if  it  conforms  to  the  laws  of  the  states  in 
which  it  does  business.  The  laws  governing  the  formation  of  corpora- 
tions differ  in  the  different  states  but  they  are  quite  similar. 

Each  state  puts  the  duty  of  supervising  the  filing  of  the  papers 
and  of  issuing  the  certificate  of  incorporation  upon  some  executive 
officer  of  the  state.  In  most  states  it  is  given  to  the  Secretary  of  State 
but  in  some  states  there  is  a  Commissioner  of  Corporations  to  whom 
this  duty  is  given. 

The  Different  Steps  necessary  under  the  corporation  laws  of  Wis- 
consin are  as  follows: 

I.  Three  or  more  persons  must  make,  sign,  and  acknowledge 
Articles  of  Incorporation  containing  the  following: 

1.     There  must  be  a  declaration  of  association. 


296 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Certificate  Stub 


^ymmssm 


2.  The  name  and  location  must  be  given. 

3.  The  capital  stock,  the  number  of  shares,  and  the  par  value  of 
each  share  must  be  given. 

4.  There  must  be  a  designation  of  the  general  officers  and  of  the 
number  of  directors,  which  must  be  at  least  three. 

5.  The  principal  duties  of  each  officer  must  be  given. 

6.  The  methods  and  conditions  upon  which  members  shall  be 
accepted  and  discharged  or  expelled  must  be  given. 

7.  Any  other  provisions  of  the  corporation,  and,  if  desired,  the 
duration  of  the  corporation  may  be  given. 

In  many  states  these  articles  are  called  Articles  of  Association. 

II.  The  original  articles  or  a  copy  verified  by  two  signers  must 
be  filed  with  the  Secretary  of  State. 

III.  A  verified  copy  of  the  Articles  of  Incorporation  showing  the 
date  of  acceptance  by  the  Secretary  of  State  must  be  recorded  with 
the  Register  of  Deeds  of  the  county  in  which  the  corporation  is  to 
have  its  home  office,  within  thirty  days.  There  is  no  legal  existence 
until  this  is  done. 

IV.  The  Register  of  Deeds  must  transmit 
to  the  Secretary  of  State  a  certificate  stating 
the  time  when  said  articles  were  recorded. 

V.  The  Secretary  of  State  then  issues  a 
certificate  of  incorporation,  which,  together  with 
the  general  incorporation  laws  of  the  state,  is 
the  charter  of  the  corporation. 

VI.  Before  a  corporation  can  transact 
business,  one-half  of  its  capital  stock  must  be 
subscribed,  and  at  least  one-fifth  thereof  paid 
in. 

This  portion  of  the  law  differs  very  greatly 
in  the  different  states,  some  requiring  that  all 
of  the  stock  be  subscribed  and  all  paid  in 
before  the  corporation  can  do  business. 

Powers  of  Corporations.  The  powers  of 
corporations  are  of  two  kinds,  those  expressly 
enumerated  in  the  charter  and  those  implied 
or  common  law  powers  that  are  necessary  be- 
cause of  corporate  existence.  Many  of  the 
powers  known  as  implied  powers  have,  in  many 
states,  been  included  in  the  statutes.  The 
principal  powers,  express  and  implied,  are  as 
follows: 

1.  To  have  a  corporate  name. 

2.  To  have    continuous,  and,  in    many  states,  perpetual    existence. 


CORPORATIONS 


297 


About  half  of  the  states  grant  perpetual  succession.  The  other 
states  grant  the  charter  for  periods  of  time  varying  from  twenty  to 
one  hundred  years.  But  in  each  of  the  latter  states,  the  corporation 
charter  may  be  renewed  at  the  end  of  the  time  specified,  thus  making 
it  in  effect  perpetual. 

3.  To  have  a  corporate  seal. 

4.  To  sue  and  be  sued  in  its  corporate  name. 

5.  To  make  contracts  in  accordance  with  the  restrictions  of  the 
charter. 

6.  To  acquire  and  hold  real  and  personal  property. 

7.  To  make  by-laws  and  other  regulations  for  their  own  government. 
Management.     The  stockholders  of  a  corporation,  as  such,  do  not 

manage  the  corporation.  A  corporation  acts  through  its  agents.  The 
agents  of  a  corporation  are  the  board  of  directors  and  the  officers. 

Board  of  Directors.  Annually  the  stockholders  elect  a  board  of 
directors  to  manage  the  corporation  for  them. 

In  some  states  the  law  allows  the  corporation  to  elect  part  of  the 

Stock  Certificate 


board  of  directors  each  year  instead  of  all. 


298 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Assignment  on  Back  of  Certificate 


The  number  of  members  of  the  board  is  determined  by  the  law  of 
the  state  or  by  the  by-laws  of  the  corporation.  It  is  usually  an  odd 
number,  such  as,  3,  5,  7,  9,  or  11.  In  electing  a  board  of  directors,  each 
stockholder  has  as  many  votes  as  he  has  shares  of  stock.  In  a  major- 
ity of  the  states,  all  directors  must  be  stockholders. 

The  board  of  directors  passes  upon  the  principal  transactions  and 
leaves  the  details  to  the  officers  or  to  a  committee  composed  of  mem- 
bers of  the  board  of  directors. 

Officers.  The  principal  officers  of  a  corporation  are  a  president, 
one  or  more  vice-presidents,  a  secretary,  and  a  treasurer.  They  are 
usually  elected  by  the  board  of  directors,  each  director  having  one 
vote,  but  they  may  be  elected  by  the  stockholders.  In  a  majority  of 
the  states,  the 
law  requires 
the  presi- 
dent to  be 
elected  from 
the  board  of 
directors.  In 
actual  prac- 
tice, the  prin- 
cipal officers 
are  usually 
elected  from 
the  boardof  di- 
rectors. The 
duties  of  the 
various  offi- 
cers are  so  well 
known  that 
they  will  not 
be  enumerat- 
ed here. 


4^^Je^aM^m^    § 


/^^^^^^^^^^^^y^^^^^^^^^^^^W  \ 


S 

s><2 


-1  o 

£3 


Y0UW 


33 
3S 


«?^2=. 


Jllflgfflffllt 


\t  (rk^n^^LJa-f, 


Member- 
ship in  a  Cor- 
poration. An 
individual 
may  become  a 
member  of  a 
corporation 
by  subscrib- 
ing for  stock 
or  by  buying  the  interest    of    a    stockholder.     When  an  individual  sub- 


\ 


CORPORATIONS  299 

scribes  for  stock  and  pays  his  subscription  in  full,  he  receives  a  certifi- 
cate  of   stock   as   evidence  of  ownership. 

Certificate  of  Stock.  A  certificate  of  stock  is  an  acknowledgment 
by  the  corporation  that  the  person  to  whom  it  is  issued  is  a  stock- 
holder and  entitled  to  all  the  rights  of  a  stockholder  as  to  the  number 
of  shares  named.     (See  illustration  on  pages  296  and  297.) 

Sale  of  Stock.  If  a  stockholder  wishes  to  sell  his  interest  in  a 
corporation  or  a  part  of  it,  he  must  sign  a  form  of  assignment  on  the 
back  of  the  certificate.  The  certificate  must  then  be  taken  to  the 
secretary  of  the  corporation,  who  will  transfer  the  ownership  on  the 
books  of  the  corporation.  If  John  Doe  wished  to  transfer  the  certif- 
icate on  page  297  to  Richard  Doe,  he  would  fill  out  and  sign  the  form 
of  assignment  on  the  back  of  the  certificate  of  stock.  (See  illustration  on 
page  298.) 

Kinds  of  Stock.     Capital  stock   may  be   Common  or  Preferred. 

Common  Stock  is  the  ordinary  stock  of  a  corporation.  If  all  of 
the  stock  is  of  one  kind  and  has  the  same  provisions  and  restrictions, 
it  is  common  stock. 

Preferred  Stock  is  stock  that  entitles  the  holder  to  a  division 
of  the  profits  called  dividends  before  any  profits  are  distributed  to  the 
holders  of  common  stock.  In  some  states,  it  may  also  entitle  the 
stockholder  to  a  preference  in  the  distribution  of  the  assets  of  the 
corporation  upon  dissolution.  The  certificate  of  stock  must  state  on 
its  face  the  privileges  and  preferences  to  be  given  to  preferred  stock. 
It  specifies  a  rate  of  dividend  which  the  holder  of  it  shall  receive 
before  the  holders  of  common  stock  receive  anything.  The  holders  of 
preferred  stock  rarely  have  the  right  to  vote  in  the  management  of  the 
corporation. 

Preferred  stock  may  be  of  two  kinds,  Cumulative  or  N  on -cumulative. 

Cumulative  Preferred  Stock  entitles  the  holder  to  a  specified  per 
cent  of  dividend  each  year  before  the  common  stock  receives  anything. 
If  there  are  not  sufficient  profits  one  year  to  pay  the  dividend  on 
cumulative  preferred  stock,  the  dividends  accumulate  and  must  be  paid  for 
each  year  that  was  unpaid  before  the  common  stockholders  can  receive 
anything. 

Non-cumulative  Preferred  Stock  entitles  the  holder  to  a  specified 
per  cent  of  'dividend  for  the  current  year  only.  If  there  are  not  suffi- 
cient profits  to  pay  the  dividend  for  the  current  year,  it  lapses  and 
is  never  paid. 

The  fact  that  the  preferred  stock  specifies  a  rate  of  dividend  does 
not  make  it  interest-bearing,   as  stock  very  rarely  bears  interest. 

Dividends.  When  a  corporation  has  made  profits,  the  board  of 
directors  has  power  to  distribute  part  or  all  of  the  profits  as  dividends. 
In  a  partnership,  each  partner  has  a  right  to  his  share  of  the  net  profits 


300 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


as  soon  as  they  are  determined,  but  in  a  corporation,  the  stockholders 
have  no  such  right.  The  declaring  of  a  dividend  is  left  to  the  discre- 
tion of  the  board  of  directors.  Dividends  are  usually  payable  in  cash 
and  are  declared  on  the  basis  of  a  certain  per  cent  of  the  par  value  of 
the  stock  or  as  a  certain  amount  per  share.  For  example,  if  a  divi- 
dend of  five  per  cent  is  declared,  the  holder  of  each  share  of  a  par  value 
of  $100  would  receive  $5.  Or,  the  dividend  may  be  declared  as  $5 
per  share. 

Sometimes,  when  the  payment  of  a  cash  dividend  would  impair  the 
working  capital  of  the  corporation,  a  stock  dividend  may  be  declared 
unless  the  state  law  prohibits  it. 

Corporation  Books.  The  books  of  account  kept  by  a  corporation 
need  not  differ  much  from  those  of  a  partnership,  but  certain  addi- 
tional books  of  record  are  necessary  to  record  the  acts  of  the  corpora- 
tion as  such.  The  principal  ones  are  the  subscription  book,  the  minute 
book,  the  stock  certificate  book,  the  stock  transfer  book,  the  stockholders'  led- 
ger, and  the  dividend  book. 

The  Subscription  Book  contains  a  record  of  all  subscribers,  their 
residences,  the  number  of  shares  of  stock  subscribed  by  each,  and  the 
par  value  of  the  stock.  In  order  to  bind  the  subscribers,  they  must 
sign  the  subscription  paper  or  sign  in  the  book. 


Subscription  Book 
Common  Capital  Stock,  $50,000 


DATE 

F. 

NAME  OF 
STOCKHOLDER 

ADDRESS 

NO.  OF 

SHRS. 

AMOUNT 

19— 
Jan. 

2 

2 
2 
2 
2 
2 

1 
1 

2 
2 
3 
3 

D.  E.  Vinton 
C.  L.  Brewer 
M.  N.  Evans 

F.  A.  Sanborn 

G.  L.  Gray 
J.  E.  Barnes 

Chicago,  111. 

a   '           it 
it              it 
it               a 
it              a 

Milwaukee,  Wis. 

200 
100 
75 
50 
50 
25 
500 

20000 
10000 
7500 
5000 
5000 
2500 

— 

50000 

— 

The  Minute  Book  is  a  book  in  which  the  minutes  of  the  meetings 
of  the  stockholders  and  of  the  board  of  directors  are  kept.  The  secre- 
tary of  the  corporation  makes  the  records  in  this  book.  All  business 
transacted  should  be  carefully  and  accurately  recorded  in  it.  The 
minutes  furnish  the  evidence  of  what  was  done  at  each  meeting,  and 
for   that  reason,   must   be  frequently   consulted   by  the   bookkeeper  and 


CORPORATIONS 


301 


accountant.     The  minutes  should  be  signed  by  the  president  and  secretary. 

The  Stock  Certificate  Book  is  a  book  consisting  of  a  number  of 
blank  stock  certificates  numbered  consecutively  and  attached  to  stubs. 
When  a  stockholder  pays  for  his  stock  in  full,  he  receives  a  certificate 
of  stock  filled  in  with  the  name  of  the  stockholder,  the  number  of 
shares,  and  the  date.  The  corporation  seal  is  attached  to  it  and  the 
signatures  of  the  president  and  the  treasurer.  The  stub  contains  details 
of  the  certificate  and  the  signature  of  the  stockholder.  When  stock  is 
sold,  the  certificate  is  surrendered  to  the  corporation  and  a  new  one 
issued.  The  canceled  certificate  is  usually  attached  to  the  stub  to 
which  it  belongs.  A  certificate  of  stock  and  the  stub  from  which 
it  is  detached  is  illustrated  on  pages  296  and  297. 

The  Stockholders'  Transfer  Book  is  a  book  of  entry  and  record  to 
record  the  sale  or  transfer  of  stock  from  one  party  to  another.  It  may 
contain  a  blank  form  to  be  filled  in  and  signed  by  the  party  transferring 
the  stock.  The  account  of  the  person  selling  is  debited  and  that  of 
the  person  buying  is  credited.     It  is  posted  to  the  stock  ledger. 

Stockholders'  Transfer  Book 


/O 


yp.  Of 7/t?u^zsri^s/ 


/S 


TRASSFEHPBD  BT 


OcrA^-^^/^L' 


^s- 


2^T 


ar 


/or 


Transfer  No.  <f\?~ 


For  value  received. 


<J=£ 


hereby  sell,  assign  and 


transfer  to. 


^UM'^rL^y  ■jJStabt^L Shares  of  the  Capital  Stock 

of  the  Wagner  Manufacturing  Co.,  of  Chicago,  III,  now 
standing  in^n^name  on  the  Company  hooks  and  repre- 
sented by  surrendered  Certificate    o3  0       . 
Witness?22kuL-hand  and  seal  this—Zx 
day  ofjf<Zs1fat<esK?sL<2S    ,  19: 

.[L.S.] 


Witness 


f(^adau2^i£hau^^. 


The  Stockholders'  Ledger  is  an  auxiliary  ledger  that  contains  the  ac- 
counts of  all  the  stockholders.  The  stockholders'  ledger  shows  each  stock- 
holder's original  purchase,  his  transfers  of  stock,  and  the  balance  of  stock 
that  he  owns.     The  sum  of  the  balances  of  the  stockholders'  ledger  must 


302 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


equal  the  amount  of  stock  outstanding.  The  stockholder  is  credited  for 
the  certificates  of  stock  he  owns  and  is  debited  for  the  certificates  he 
surrenders. 

Stockholders'  Ledger 

C.  N.  Towner,  3016  State  St.,  Milwaukee,  Wis. 


DATE 
19— 

HOW 
DISPOSED  OP 

CEK. 
NO. 

SHKS. 

AMOUNT 

DATE 
19— 

HOW 
ACQUIRED 

CER. 
NO. 

SHRS. 

AMOUNT 

June 
July 

Dec. 

8 
10 
15 
81 

C.  L.  Voss 
Surrendered 

D.  C.  Cross 
Balance 

60 

5 

95 

10 

100 
50 

75 

1000 

10000 
5000 
7500 

— 

May 

June 
July 

1 
15 
30 
10 
10 

Original 

D.  G.  Inkley 

C.G.Gardner 

Reissued 

Reissued 

Balance 

5 
60 

85 
95 
96 

100 
10 
25 
50 
50 

10000 
1000 
2500 
5000 
5000 

— 

235 

23500 

— 

235 

23500 

— 

19— 
Jan. 

1 

75 

7500 

— 

The  Dividend  Book  is  a  book  in  which  a  record  is  kept  of  each 
dividend  declared  and  paid.  It  contains  the  names  of  all  stockholders 
of  record  at  the  time  of  declaring  a  dividend,  with  the  address,  the 
number  of  shares,  the  dividend,  and  the  number  of  the  dividend  check. 
It  may  contain  a  column  for  the  signature  of  each  stockholder  but  that 
is  not  necessary,  as  most  corporations  pay  by  a  dividend  check  that  is 
a  receipt  when  properly  indorsed. 


Dividend  Book 

THE  BROOKS  IRON  CO. 

Dividend  No.  1,  Jan.  10,  19— 

5% 


NO. 

STOCKHOLDER 

NUMBER 

OF 
SHARES 

PAR 

VALUE    OP 

SHARES 

AMOUNT 

OF 
DIVIDEND 

WHEN 
PAID 

CHECK 
NO. 

1 

2 
3 

4 
5 

7 

C.  E.  Brooks 
H.  L.  Jewett 
N.  E.  Hilton 

B.  E.  Blackburne 
J.  I.  Collins 

D.  C.  Bain 

400 
250 

100 

150 

50 

50 

40000 

25000 

10000 

15000 

5000 

5000 

— 

2000 

1250 
500 
750 
250 
250 

— 

Jan. 

10 
10 
10 
10 
10 
10 

645 
646 
647 
648 
649 
650 

1000 

100000 

— 

5000 

— 

In  addition  to  these  the  corporation  may  keep  an  installment 
book  and  an  installment  script  book  if  the  subscriptions  are  payable 
in  installments. 


CORPORATIONS  303 

The  Installment  Book  shows  the  amount  due  from  each  stockholder 
for  each  installment,  and  his  payment. 

The  Installment  Script  Book  is  a  book  of  receipts  and  stubs  which 
are  filled  in  when  the  installments  are  paid,  the  receipts  being  given 
to  the  stockholder.  When  all  the  installments  have  been  paid,  the 
script  receipts  are  surrendered  to  the  corporation  and  a  certificate  of 
stock  is  issued. 

A  Bond  Register  may  be  kept  if  the  corporation  issues  bonds,  a 
corporate  calendar  may  also  be  kept  to  show  the  time  of  holding  meet- 
ings, sending  notices,   making  reports,  etc. 

Exercise  73.  Draw  forms  for  a  stock  transfer  book  and  for  a 
stockholders'  ledger,  make  the  entries,  and  transfer  them  to  the  stock- 
holders' ledger. 

1.  On  July  1,  the  Shaw  Motor  Co.  was  incorporated  for  $50,000 
divided  into  500  shares  of  a  par  value  of  $100  each,  with  paid  up  stock 
as  follows:  J.  C.  Shaw,  200  shares;  C.  L.  Coskey,  150  shares;  J.  E. 
Thomas,  100  shares;    D.  L.  Reinnoldt,  50  shares. 

Enter  in  the  stockholders'  ledger  as  it  is  original  stock  and  would  be 
entered  first  in  the  subscription  book  and  not  in  the  stock  transfer  book. 

2.  August  15.     J.  E.  Thomas  transferred  25  shares  to  C.  L.  Coskey. 

3.  September  10.  D.  L.  Reinnoldt  transferred  25  shares  to  D.  C. 
Hilty,  15  shares  to  J.  C.  Shaw,  and  10  shares  to  J.  E.  Thomas. 

4.  October  5.  C.  L.  Coskey  transferred  25  shares  to  J.  E.  Thomas 
and  15  shares  to  D.  C.  Hilty. 

5.  November  25.  J.  C.  Shaw  transferred  20  shares  to  C.  L. 
Coskey  and  10  shares  to  J.  E.  Thomas. 


CHAPTER  XXXIV 
CORPORATION  ENTRIES  AND  ACCOUNTS 


In  opening  up  corporation  books,  some  new  accounts  are  necessary 
to  record  the  organization  of  the  corporation  and  the  dealings  of  the 
corporation  with  its  stockholders.  The  principal  accounts  peculiar  to 
a  corporation  are  the  Capital  Stock  account,  the  Subscriptions  account, 
the   Unsubscribed  Stock  account,  and  the    Treasury  Stock  account. 

Capital  Stock  Account.  This  account  is  kept  to  show  the  entire 
capital  stock  authorized  by  the  charter.  It  is  credited  for  the  authorized 
capital  stock  when  the  corporation  is  organized  whether  all  of  the  stock 
is  subscribed  for  and  issued  or  not.  The  account  always  shows  a  liability. 
If  all  the  stock  has  been  issued,  it  represents  the  liability  of  the  corpora- 
tion to  its  stockholders.  If  only  part  of  the  stock  has  been  issued,  the 
part  unsubscribed  must  be  deducted  from  the  authorized  capital  stock 
to  find  the  liability  to  stockholders.  The  credit  to  Capital  Stock  represents 
the  maximum  amount  of  stock  that  can  be  issued  according  to  the 
charter.  For  this  reason,  some  prefer  to  call  this  account  Authorized 
Capital  Stock. 

Subscriptions  Account.  This  account  is  kept  to  show  the  par  value 
of  the  stock  subscribed  for  and  the  payments  on  the  subscriptions.  It 
is  debited  for  all  subscriptions  to  stock  and  credited  for  all  payments  on 
subscriptions.  The  account  must  show  an  asset  unless  all  the  subscrip- 
tions have  been  paid,  when  it  balances. 

Unsubscribed  Stock.  This  account  is  kept  to  show  the  amount  of 
the  capital  stock  authorized  but  not  subscribed  for.  It  is  debited  for 
the  authorized  capital  stock  that  is  unsubscribed  and  credited  when  this 
stock  is  subscribed  for.  Although  the  account  always  shows  a  debit 
balance  unless  it  balances)  it  is  not  treated  as  an  asset  but  as  a  deduc- 
tion from  the  liability  of  Capital  Stock.  In  the  balance  sheet  it  should 
be  shown  in  that  way  on  the  liability  side. 

Treasury  Stock.  Treasury  Stock  is  stock  that  has  once  been  issued 
to  stockholders  but  which  has  been  bought  back  by  the  corporation, 
donated  to  the  corporation,  or  forfeited  to  it.  It  is  called  treasury 
stock  because  it  is  usually  held  by  the  treasurer  of  the  corporation. 
In  some  states  a  corporation  is  prohibited  from  holding  its  own  stock. 

304 


CORPORATION  ENTRIES  AND  ACCOUNTS 


305 


In  that  case,  there  can  be  no  account  of  treasury  stock.  Any  of  its 
own  stock  acquired  by  a  corporation  must  be  held  by  a  trustee  for  the 
corporation  and  charged  to  him.  Original  unsubscribed  stock  should 
never  be  called  treasury  stock. 

Several  problems  will  now  be  explained  to  show  the  opening  entries 
for  corporations  formed  under  different  conditions. 

All  Subscriptions  Paid. 

Problem  1.  William  Evarts,  Charles  Burchard,  James  Oastler,  and 
Conrad  Pelton  have  formed  the  Evarts  Mfg.  Co.  with  an  authorized 
capital  of  $50000.  William  Evarts  subscribed  for  $25000;  Charles  Bur- 
chard for  $15000;  and  James  Oastler  and  Conrad  Pelton  for  $5000  each. 
All  the  subscriptions  have  been  paid  in. 

Subscriptions  account  should  be  debited  and  Capital  Stock  account 
credited  for  the  authorized  capital,  $50000.  In  the  cash  book,  Cash 
should  be  debited  and  Subscriptions  credited  for  the  same  amount.  The 
journal  entry  would  be  made  as  follows: 


Milwaukee,    Wis.,    October    1,    19 — . 


The  Evarts  Mfg.  Co.  was  incorporated  un- 
der the  laws  of  the  State  of  Wisconsin  on  Oct. 
1,  19 —  with  an  authorized  capital  of  $50,000, 
divided  into  500  shares,  each  with  a  par  value 
of    $100. 

1 
500     shares     subscribed  50000 

as  follows: 
Wm.     Evarts,    250    shares 
Chas.  Burchard,  150  shares 
James    Oastler,    50    shares 
Conrad  Pelton,    50  shares 

In  the  cash  book,  the  following  entry  would  be  made  to  record  the 
payment  of  the  subscriptions: 


Subscriptions 

To  Capital  Stock 


Cash  Receipts 


19— 
Oct. 


Subscriptions 


As  follows: 

Wm.  Evarts  $25000 

Chas.  Burchard  15000 

James  Oastler  5000 

Conrad  Pelton  5000 


50000 


306  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Part  of  Stock  Subscribed. 

Problem  2.  If  the  same  company  had  been  incorporated  for 
$50000  with  only  part  of  the  stock  subscribed  for  and  paid  in,  other 
entries  would  be  necessary.  The  subscriptions  are  as  follows:  Wm. 
Evarts,   $25000;  James  Oastler,   $5000;  and  Conrad  Pelton,   $5000. 

The  entries  necessary  will  all  be  made  as  journal  entries  with  the 
details   omitted. 

When  the  corporation  is  formed  the  following  entry  would  be  made: 
Subscriptions  $35000 

Unsubscribed  Stock  15000 

To  Capital  Stock  $50000 

When  the  subscribers  pay  for  their  stock,  the  following  entry 
should   be   made: 

Cash  $35000 

To  Subscriptions  $35000 

When  this  unsubscribed  stock  is  afterward  subscribed  for,  the  entry 
would    be 

Subscriptions  $15000 

To  Unsubscribed  Stock  $15000 

When  this  stock  is  paid  for  the  entry  would  be 
Cash  $15000 

To  Subscriptions  $15000 

In  many  cases,  stock  is  paid  for  by  transferring  some  asset  other 
than  cash  to  the  corporation.  It  may  be  a  patent  right,  real  estate, 
fixtures,  a  stock  of  goods,  machinery,  delivery  equipment,  etc. 

In   each   case,   the   entry   should   first   be  •  made  as   a   debit   to   Sub- 
scriptions and  a  credit  to  Capital  Stock.     Then,  to  record  the  payment, 
the  account  of  the  asset  is  debited  and  Subscriptions  credited  as  follows: 
Patent  $10000 

To  Subscriptions  $10000 

Real  Estate  $5000 

To  Subscriptions  $5000 

Purchases  $3000 

To  Subscriptions  $3000 

Partnership  Changed  to  Corporation. 

Because  of  the  advantages  of  the  corporate  form,  many  partner- 
ships and  individual  proprietorships  have  been  changed  to  corporations. 
This  may  be  done  without  increasing  the  capital  of  the  partnership, 
the  capital  may  be  increased  by  paying  the  proprietors  something  for 
the  good  will  of  the  business,  or  the  partnership  may  be  changed  to  a 
corporation    by    increasing    the    stock   in    order    to    permit    others    to    be 


or, 


or, 


CORPORATION  ENTRIES  AND  ACCOUNTS 


307 


taken  in  as  stockholders.     The  latter  is  the  most  common  proceeding  and 
the  partners  are  usually  given  stock  for  the  good  will  of  the  partnership. 

In  changing  from  a  partnership  to  a  corporation,  the  same  books  of 
account  may  be  used  or  a  new  set  of  books  may  be  opened  up.  Both 
methods  will  be  illustrated. 

The  basis  of  the  change  from  a  partnership  to  a  corporation  is  a 
Balance  Sheet  or  Statement  of  Assets  and  Liabilities.  The  corporation,  on 
accepting  the  partnership  business  in  payment  of  stock,  may  take  the 
values  on  the  partnership  books  or  change  them  to  agree  with  actual  values. 

Without  Increasing  the  Stockholders. 

Problem  3.  The  partnership  business  of  the  firm  of  Harris  &  Bain 
shows  the  following  condition,  September  1,   19 — 

Balance  Sheet,  September  1,  19 — 


Assets 

Real  Estate 

$10000 

Office  Fixtures 

400 

Delivery  Equipment 

1250 

Merchandise  Inventory 

6780 

Notes  Receivable 

1350 

Accounts  Receivable 

6680 

Cash 

1740 

Liabilities 
C.  Harris,  Capital 
N.  Bain,  Capital 
Notes  Payable 
Accounts  Payable 


$28200 


$12000 
8000 
4500 
3700 


$28200 


The  Harris-Bain  Co.  has  been  incorporated  for  $20000  to  take  over 
the  business  of  the  partnership  of  Harris  &  Bain. 

If  the  same  books  of  account    are    to    be    used  by  the  corporation, 
the  following  entries  would  be  made: 

Subscriptions  $20000 

To  Capital  Stock  $20000  . 

Then,  to  show  the  payment  of  the  subscriptions: 
C.  Harris,  Capital  $12000 

N.  Bain,  Capital  8000 

To  Subscriptions  $20000 

If  a  new  set  of  books  is  to  be  opened  up,  as  is  the  usual  custom,  the 
old  books  must  first  be  closed. 

To  Close  the  Old  Books,  the  following  entries  must  be  made: 
Harris-Bain  Co  $28200 

To    Real  Estate  $10000 

Office  Fixtures  400 

Delivery  Equipment  1250 

Merchandise  Inventory  6780 

Notes  Receivable  1350 

Accounts  Receivable  6680 

Cash  1740 


308  METROPOLITAN  SYSTEM  OP  BOOKKEEPING 

To  close  the  assets  that  have  been 
transferred  to  the  Harris-Bain  Co. 

Notes  Payable  $4500 

Accounts  Payable  3700 

To  Harris-Bain  Co.  $8200 

To  close  the  liabilities  that  have  been 

assumed  by  the  Harris-Bain  Co. 

Harris-Bain  Co.,  Stock  $20000 

.    To  Harris-Bain  Co.  $20000 

200  shares  of  stock,  par  value, 
$100  each,  in  full  payment  of  the 
business  transferred  to  the  Harris- 
Bain   Co. 

C.  Harris,  Capital  $12000     , 

N.  Bain,  Capital  8000 

To  Harris-Bain  Co.,  Stock  $20000 

Distributed  stock  in  the  Harris- 
Bain  Co.  in  full  for  the  respective 
partners'  interests. 

To  Open  up  a  New  Set  of  Books,  there  would  be  the  usual  memoran- 
dum, then  the  following  entries: 

September  1,   19 — 
Subscriptions  $20000 

To    Capital  Stock  As  follows:  $20000 

C,   Harris,   120  shares 
N.  Bain,        80     " 


September  1 

- 

Real  Estate 

< 

510000 

Office  Fixtures 

400 

Delivery  Equipment 

•1250 

Merchandise  Inventory 

6780 

Notes  Receivable 

1350 

Accounts  Receivable 

6680 

Cash 

1740 

To    Notes  Payable 

$  4500 

Accounts  Payable 

3700 

Harris  &  Bain 

20000 

To  transfer  the  assets  and 

assume 

the  liabilities  of  Harris  &  Bi 

ain, 

ac- 

cording  to  the  action  of  the  Board 

of    Directors,     per     Minute 

Book, 

page  -. 

CORPORATION  ENTRIES  AND  ACCOUNTS  309 

September  1 
Harris  &  Bain  $20000 

To    Subscriptions  $20000 

Issued  stock  in  payment  of  the  busi- 
ness of  Harris  &  Bain,  transferred, 
per  Minute  Book,  page,  —  as  fol- 
lows : 

C.   Harris,   120  shares 
N.  Bain,        80     " 

Since  the  laws  of  many  states  provide  for  at  least  three  incorporators,  it  would  be  necessary 
to  sell  at  least  one  share  to  an  employee  or  to  some  one  else  in  order  to  meet  the  requirements  in 
these  states. 

The  Transfer  of  a  Partnership  with  Good  Will  Included. 

Problem  4.     Using  the  same  balance  sheet  as  in  problem  3,  we  shall 

assume  that  the  Harris-Bain  Co.  is  incorporated  for  $25000,  all  of  which 

is  issued  to  the  partners  for  their  interest  in  the  firm  of  Harris  &  Bain. 

Only  those   entries   will    be    given    that    are  different  from  those  of 

problem  3. 

It  is  understood  that  the  $5000  issued  above  the  net  worth  of  the 
old  business  is  for  the  good  will  of  the  old  business.     The  partners  are 
equal    partners    and    must    share   in    the    $5000    equally.     The    following 
entry  would  first  be  made  if  the  old  books  of  account  are  used: 
Good  Will  $  5000 

To    C.   Harris,   Capital  $  2500 

N.  Bain,   Capital  2500 

Value  of  the  good  will  of  the  firm 
when  purchased  by  the  Harris-Bain 
Co.,  and  divided  equally. 
Then,   the  entry  to  close  the  Capital  accounts  and  show  the  pay- 
ment of  the  subscriptions: 

C.  Harris,   Capital  $14500 

N.  Bain,   Capital  10500 

To  Subscriptions  $25000 

If  new  books  are  opened  up,  the  entries  would  be  similar  to  those 
of  problem  3,  except  that  Good  Will,  $5000,  would  be  included  as  a 
credit  in  closing  the  old  books  and  as  a  debit  in  opening  up  the  new 
books.  The  amounts  to  the  accounts  of  Harris  &  Bain,  etc.,  would  be 
changed  correspondingly. 

More  Stockholders  than  Members  of  Partnership. 
Problem  5.  Another  problem  must  be  considered,  the  transfer  of 
a  partnership  business  to  a  corporation  with  an  increase  sufficient  to 
permit  others  to  be  taken  in  as  stockholders.  The  same  balance  sheet 
will  be  used  as  in  problem  3.  The  authorized  capital  is  $50000,  $25000 
of  which  is  issued  to  the  old  firm  for  the  net  worth  of  the  old  business 


310  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

and  the  Good  Will  of  $5000.  Of  the  balance,  $15000  is  subscribed  for 
at  par  by  others  and  the  subscriptions  paid  in  cash.  In  a  case  like 
this,  the  old  books  are  seldom  used.  The  entry  to  close  the  old  books 
is  the  same  as  that  given  in  problem  4.  The  entries  to  open  the  new 
books  are  as  follows: 

Subscriptions  $40000 

Unsubscribed  Stock  10000 

To  Capital  Stock  $50000 

The  entries  to  transfer  the  business  of  Harris  &  Bain  to  the  corpo- 
ration are  the  same  as  those  given  in  problem  4. 

When    the    other    subscribers    pay    their    subscriptions   in    cash,  the 
following  entry  would  be  made: 

Cash  $15000 

To  Subscriptions  $15000 

Note  Given  for  a  Stock  Subscription. 

Problem  6.  Taking  the  conditions  given  in  problem  5,  we  shall 
suppose  that  the  unsubscribed  stock  is  afterward  subscribed  for  by 
C.  Landers,  $6000  and  D.  Kyle,  $4000.  C.  Landers  pays  his  sub- 
scription in  cash  while  D.  Kyle  gives  a  note  at  one  year,  with  interest 
at  6%  in  payment.  The  following  entries  are  necessary: 
Subscriptions  $10000 

To    Unsubscribed  Stock  $10000 


and, 
and, 


Cash  $  6000 

To    Subscriptions  $  6000 


Notes  Receivable   (Stock)  $  4000 

To    Subscriptions  .        $  4000 

A  note  given  for  a  stock  subscription  .should  not  be  charged  to  the 
ordinary  Notes  Receivable  account  but  to'  a  separate  account,  because 
notes  of  this  character  are  not  often  available  for  discount  and  are 
often  never  paid  in  cash  but  are  frequently  renewed  and  the  dividends 
allowed  to  pay  for  the  stock. 

Preferred  Capital  Stock. 

Problem  7.  The  Curtiss  Manufacturing  Co.  is  incorporated  for 
$200000,  $100000  being  common  stock  and  $100000  cumulative  pre- 
ferred stock.  75%  of  the  common  stock  is  subscribed  for  and  60%  of 
this  paid  in.  80%  of  the  preferred  stock  is  subscribed  for  and  75% 
of    this    is    paid    in.  f 

In  making  entries  for  a  corporation  that  is  formed  with  both  com- 
mon and  preferred  stock,  all  entries  for  the  two  kinds  of  stock  must  be 
made  so  as  to  show  what  kind  of  stock  is  affected  by  the  entry.  Sep- 
arate accounts  must  be  kept  for  Common  Capital  Stock  and  for  Pre- 
ferred  Capital  Stock.     In  the  same  way  the  accounts  for  subscriptions 


CORPORATION  ENTRIES  AND  ACCOUNTS  311 

to  common  and  preferred  stock  and  for  unsubscribed  common  stock  and 
unsubscribed  preferred  stock  must  be  kept  separate. 

The    entries    would    be    as    follows: 

Subscriptions,   Common  Stock  $75000 

Unsubscribed  Common  Stock  25000 

To  Common  Capital  Stock  $100000 

Subscriptions,  Preferred  Stock  $80000 

Unsubscribed  Preferred  Stock  20000 

To  Preferred  Capital  Stock  $100000 

Cash  $45000 

To  Subscriptions,   Common  Stock  $45000 

Cash  $60000 

To  Subscriptions,  Preferred  Stock  $60000 

Make  the  entries  in  journal  form  to  open  the  books  in  the  following 
transactions: 

Exercise  74.  The  Brown  Mfg.  Co.  is  incorporated  with  a  capital 
stock  of  $50000,  divided  into  500  shares  of  $100  each.  The  entire  amount 
is  subscribed  and  paid  for  as  follows:  D.  C.  Robinson,  200  shares;  C.  L. 
Stockton,  150  shares;  M.  E.   Erwin,    100   shares;     F.  L.  Burns,  50  shares. 

Exercise  75.  May  1.  The  City  Transfer  Co.  is  incorporated  with 
a  capital  stock  of  $25000,  divided  into  2500  shares  of  $10  each.  1500 
shares  are  subscribed  for  as  follows:  C.  L.  Scott,  750  shares;  D.  E. 
Greene,  400  shares;  E.  F.  Phelps,  250  shares;  L.  N.  Harrison,  100 
shares. 

a.  Each   subscriber   pays   50%  of   his   subscription. 

b.  June  10.  D.  L.  Winter  subscribes  for  150  shares  and  pays  50% 
of  his  subscription. 

c.  Nov.   1.     Each   subscriber   pays   the   balance    of   his   subscription. 

Exercise  76.  The  Joseph  Hadden  Mfg.  Co.  is  incorporated  with 
an  authorized  capital  of  $50000  common  stock  and  $50000  preferred 
stock.  One-half  the  common  stock  is  subscribed  for  and  paid  in  full. 
$30000  of  the  preferred  stock  is  subscribed  for  and  50%   of  it  paid  in. 

Exercise  77.  The  J.  C.  Parker  Co.'  is  incorporated  with  an  author- 
ized capital  of  $100000.  $75000  is  subscribed  for,  $50000  of  which  is 
paid  in  cash.  J.  C.  Parker  paid  his  subscription  of  $25000  by  trans- 
ferring to  the  corporation  his  patent  rights  in  several  machines  for  the 
manufacture  of  wire  fence.  D.  E.  Evans  was  voted  $5000  of  stock 
for  his  services  in  organizing  the  corporation. 

Exercise  78.  The  partnership  of  Long,  Hinckley  &  Allen  has  de- 
cided to  incorporate  under  the  name  of  The  Long  Mfg.  Co.,  with  a  capi- 


312 


METROPOLITAN  SYSTEM  OP  BOOKKEEPING 


tal  of   $30000,    divided   equally  among  the  partners.     The  balance  sheet 
upon  which  the  transfer  is  made  is  as  follows: 


Balance  Sheet,   March  1,   19— 


Assets 

Land  and  Buildings 

$12500 

Office  Fixtures 

375 

Horses  and  Wagons 

580 

Mdse.   Inventory 

9375 

Notes  Receivable 

3810 

Accounts  Receivable 

13570 

Cash 

7430 

Liabilities 
D.   Long,   Capital 

A.  Hinckley,   Capital 

B.  Allen,   Capital 
Mortgages  Payable 
Notes  Payable 
Accounts  Payable 


$47640 


$10000 

10000 

10000 

5000 

4500 

8140 

$47640 


a.  Make  the  entry  to  transfer  from  the  partnership  to  the  corpo- 
ration,   using    the    same    books    of    account. 

b.  Make  the  entries  to  close  the  partnership  books  and  to  open 
corporation  books  if  new  books  are  to  be  used. 

Exercise  79.  Using  the  same  balance  sheet  as  in  Exercise  78, 
the  partnership  is  incorporated  for  $45000,  each  partner  receiving  one- 
third  of  the  capital  stock.  Make  the  entries  necessary  to  close  the 
partnership    books    and    to    open    the    corporation    books. 

Exercise  80.  The  partnership  of  Gill  &  Johns  is  incorporated  under 
the  name  of  the  Gill  Mfg.  Co.,  for  $50000.  $30000  is  subscribed  for  by 
Gill  &  Johns,  equal  partners  and  the  partnership  business  is  transferred 
to  the  corporation  in  full  payment  of  this  stock.  S.  Vine  subscribed  for 
$5000  and  K.  D.  Price  for  $5000.  Both  paid  their  subscriptions  in  full. 
The  balance  sheet  of  the  firm  of  Gill  &  Johns  is  as  follows: 


Balance  Sheet, 

Jan.   1,   19 — 

Assets 

Liabilities 

Real  Estate 

$11500 

E.  F.   Gill,   Capital 

$12000 

Patents 

2750 

J.   C.  Johns,   Capital 

12000 

Machinery  and  Tools 

3500 

Notes  Payable 

5000 

Furniture  and  Fixtures 

275 

Accounts  Payable 

9530 

Delivery  Equipment 

630 

Reserve  for  Bad  Debts 

475 

Material 

2175 

Labor,  unpaid 

615 

Finished  Goods 

3850 

Notes  Receivable 

3<250 

Accounts  Receivable 

7750 

Insurance,  unexpired 

160 

Cash 

3780 

$39620 

a.  Make  the  entries  to  close  the  partnership  books  and  to 
corporation  books. 

b.  Make  the-  entries  for  the  cash  subscriptions. 


$39620 
open  the 


CORPORATION  ENTRIES  AND  ACCOUNTS  313 

c.  May  1.  F.  A.  Curtis  is  engaged  as  manager.  He  subscribed 
for  $5000  of  stock  and  gave  his  note  for  that  amount  payable  two  years 
after  date.      Make  the  entry. 

Exercise  81.  The  National  Enameling  Company  is  incorporated 
for  $100000.  $50000  of  this  is  common  stock  and  $50000  is  6%  pre- 
ferred stock.  The  corporation  purchases  the  business  of  the  Johnson 
Mfg.  Co.,  at  the  following  valuation:  Plant  &  Sundry  Assets,  $35000; 
Good  Will,  $15000.  Preferred  stock  is  issued  for  the  value  of  the  plant 
and  other  assets  and  common  stock  for  the  good  will  of  the  Johnson 
Mfg.   Co. 

The  balance  of  the  common  stock  is  subscribed  for  and  paid  asf 
follows:  C.  Torrent,  $15000;  D.  Jackson,  $12000;  B.  Berger,  $8000 
The  balance  of  the  preferred  stock  is  held  for  future    development. 


CHAPTER  XXXV 
MANUFACTURING  COSTS 


In  order  to  understand  a  manufacturing  business,  it  is  necessary 
to  understand  the  various  elements  that  go  to  make  up  the  total  cost 
of  the  manufactured  article.  These  elements  vary  somewhat  according 
to  the  business  and  the  article  manufactured  but  the  principal  elements 
are  the  same.  There  are  three  principal  elements  of  cost  in  manu- 
facturing: the  cost  of  the  raw  material,  the  cost  of  the  labor,  and  the 
manufacturing  or  factory  expenses. 

Raw  Material.  Raw  material,  in  an  accounting  sense,  is  anything 
that  enters  directly  into  the  material  used  to  produce  the  finished 
product.  It  may  be  material  in  its  natural  state,  as  iron  ore,  wood, 
wool,  cotton,  hides,  etc.,  or  it  may  be  the  finished  or  partly  finished 
product  of  another  factory  or  of  a  department  of  the  same  factory,  as, 
iron  castings  for  stoves,  cloth  for  suits,  leather  for  shoes,  gasoline 
engines  for  automobiles,  etc. 

The  cost  of  the  raw  material  includes  not  only  the  cost  of  the  ma- 
terial but  also  the  cost  of  whatever  charges  are  necessary  to  put  the 
material  into  the  factory,  as,  freight  and  drayage  charges  and  duties  on 
imports. 

In  order  that  a  business  may  know  what  raw  material  has  been 
used,  and  what  is  on  hand  at  any  particular  time,  a  record  should  be 
kept  of  the  raw  material  received,  that  used,  and  the  amount  on  hand 
at  any  time.  This  is  usually  called  a  Stock  Record,  but  may  be  called 
an  Inventory  Book  or  a  Stores  Record, 

The  Stock  Record.  This  record  may  be  kept  in  a  bound  book  but 
is  more  frequently  kept  on  loose-leaf  sheets  which  may  be  put  into  a 
binder,  or  it  may  be  kept  on  stock  cards.  A  separate  sheet  or  card 
may  be  kept  for  each  kind  of  raw  material  purchased,  but  if  there  are 
not  many  different  kinds  of  raw  material  used,  they  may  all  be  kept  on 
several    continuous   sheets   with   many   articles   on   a   sheet. 

After  the  invoice  has  been  checked  as  to  quantities,  prices,  terms, 
and  extensions,  it  is  entered  in  the  book  of  entry  used,  then  it  is  entered 
on  the  debit  side  of  the  proper  stock  record.  The  freight  should  be 
added  to  the  cost  of  the  material  and  the  cost  per  unit  computed  to  at 

314 


MANUFACTURING  COSTS 


315 


It 

•Ja 

'h 

•s  8 

^  <o 

?! 
y 

U 

c 

5 

*=i 

J 

"5 

1 

■Hi 
Jill 

"  <3 

316 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


least  four  decimal  places  and  entered.  The  stock  is  given  out  only  on  a 
requisition  or  order  issued  and  signed  by  some  one  authorized  to  do  so, 
as   the   superintendent   or  a  foreman. 


Materials  Stock 

Record 

Article 

Maximum     100  gal. 

Raw  Linseed  Oil 

Minimum   20  aaL 

Section  C 

Rii,    ** 

T?A«1c     B 

RECEIVED 

DELIVERED 

COST 
PER 
GAL. 

VERIFIED 

DATE 

ORDER 

NO. 

QUAN- 
TITY 

DATE 

ORDER 
NO. 

QUAN- 
TITY 

BAL. 

DATE 

EMPLOYEE 

1/10 

1275 

50 

1/15 

1896 

10 

50 
40 

.615 

1/25 

1932 

20 

20 

1/31 

C.  L.  Hart 

2/5 

1342 

75 

2/10 

2080 

15 

95 
80 

.6125 

The   entry  in  the  Materials  Stock  Record    for  Material  Delivered  is 
made  from  the   Materials  Requisition   blank. 


Materials  Requisition 
Deliver  to 

Jan.   15,   19 — 

Department 

Operation    No.    1896 

MATERIAL 

QUAN- 
TITY 

CHECK 

Raw  Linseed  Oil 

10  gal. 

V 

C.  D.  SHAW, 

Manager. 

At  any  time,  the  difference  between  the  material  purchased  and 
that   used   may  be  found   and   the   balance   put  in   the   balance   column. 

The  materials  stock  record  really  constitutes  a  perpetual  inventory 
book  for  raw  material.     It  is  a  valuable  book  also  for  the  buyer,  for  it 


MANUFACTURING  COSTS 


317 


usually  contains  a  notation  to  order  more  when  the  quantity  falls  to  a  cer- 
tain minimum.  Whenever  the  quantity  on  hand  of  any  kind  of  material 
is  low,  it  should  be  checked  with  the  actual  material  on  hand.  In  that 
way  it  is  not  necessary  to  take  a  physical  inventory  at  the  time  of 
making  the  statements  because  the  book  inventory  will  be  checked 
several  times  a  year  by  this  method. 

Labor.  The  second  element  of  cost  in  manufacturing  is  often  the 
most  important  element.  The  term  labor  as  a  prime  element  of  cost 
includes  all  productive  or  direct  labor.  It  includes  the  cost  of  all 
labor  employed  directly  in  any  of  the  manufacturing  processes  of  con- 
verting the  raw  material  into  the  finished  product.  It  does  not  include 
labor  that  is  a  necessary  part  of  the  process  of  manufacturing  but  which 
does  not   enter  directly  into  the  finished   product. 

Labor  that  is  unproductive  or  indirect  includes  the  wages  of  time 
keepers,  watchmen,  workmen  employed  in  cleaning  or  repairing  ma- 
chines,   common    laborers,    engineers,    firemen,    foremen,    etc. 

Proper  records  are  kept  by  means  of  Time  Cards  or  Sheets.  They 
are  then  summarized  on  the  Pay  Roll  Sheet  and  the  proper  distribution 
made.  Most  factories  find  it  necessary  to  know  how  much  labor  was 
expended  on  each  job  or  on  each  lot  that  goes  through  the  factory. 
The  Time  Card,  for  that  reason,  may  show  a  great  many  details  not 
necessary   for   the   bookkeeping   records. 


Time  Sheet 

THE  WEST  FOUNDRY  CO. 

Pate  SOc 

NflTTlft        »•    A- 

Harter 

Cost  Rhftfit  No.      135 

WEEK  ENDING 

JOB  NO. 

Jan.   10,   19— 

TIME 

AMOUNT 

COST 
LEDGER 

M 

T 

w 

T 

F 

s 

749 

6 

2 

1 

9 

2 

70 

V 

751 

2 

1 

2 

5 

2 

1 

13 

3 

90 

V 

752 

1 

3 

2 

1 

7 

2 

16 

4 

80 

V 

755 

3 

4 

3 

2 

12 

3 

60 

V 

0 

9 

9 

9 

9 

9 

5 

50 

15 

00 

V 

These  cost  records  are  then  posted  and  summarized  under  the 
various  jobs  or  lots  in  the  cost  ledger.  The  study  of  the  different 
methods  of  keeping  these  cost  records  is  a  study  of  cost  accounting  and 
will  not  be  explained  here. 


318 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Pay  Roll  for  the  Week  Ending  Jan.  2,  19 — 

NO. 

NAME 

II 

T 

w 

T 

F 

s 

TOTAL 

NO. 
HOURS 

WAGES 

PER 
HOUR 

TOTAL 
WAGES 

DISTRIBUTION 

PRO- 
DUCT. 
LABOR 

[UNPRO- 
DUCT. 
LABOR 

|   FUEL, 
LIGHT  & 
POWER 

deliv'y 

EXP. 

SHIP- 
PING 

8 
15 

28 
30 
31 
32 
35 
36 
37 

C.  D.  Howard 

D.  E.  Pierce 
M.  E.  Buckland 

C.  L.  Kelley 

D.  L.  Loyd 
C.  N.  Wolfe 
M.  E.  Newman 
M.  L.  Lucas 

T.  N.  Gordon 

9 
9 
9 
i 

'.) 
9 
8 
8 
8 

9 
8 

9 

it 
9 
9 
8 
8 
8 

9 
8 
9 
9 
9 
9 
8 
8 
5 

9 
9 
9 
9 
9 

10 
8 
8 
6 

9 
9 
9 
9 

8 
10 
8 
8 
0 

9 
9 
6 
9 

8 

'J 
8 

5 
0 

*f 

52 
50 
49 
52 
56 
48 
45 
26 

40c 
35c 
35c 
30c 
20c 
30c 
30c 
32c 
20c 

21 
18 
17 

14 
10 
16 
14 
14 
5 

60 

20 
50 
70 
hP 

80 
¥> 
',() 
20 

21 
18 
17 

14 

80 

20 
50 
70 

10 

40 

16 

SO 

14 

40 

U 
5 

ho 
20 

73 

77 

74 

76 

70 

62 

432 

133 

20 

V 
72 

V 
10 

ho 

V 
16 

80 

V 

u 

',o 

V 
19 

60 

1 

1 

The  elements  of  material  and  productive  labor  constitute  the  first 
or  prime  cost  of  manufacturing. 

Manufacturing  Expenses.  All  other  costs  of  manufacturing  are 
called  manufacturing  or  factory  expenses.  They  include  unproductive 
labor,  already  explained,  factory  supplies,  as,  oil,  grease,  waste,  etc., 
fuel,  light,  and  power,  including  the  wages  of  engineers  and  firemen,  re- 
pairs to  machinery,  tools,  and  equipment,  rent  of  factory,  etc.  All  of 
these  are  regularly  charged  from  month  to  month  or  from  week  to  week 
as  the  expenditure  is  made.  It  includes  also  such  a  part  of  the  charges 
for  taxes,  insurance,  expenses  of  delivery  equipment,  etc.,  as  pertain  to 
the  manufacturing  part  of  the  business.  It  also  includes  proper  depre- 
ciation on  machinery,  tools,  equipment,  and  on  the  building  used  for 
factory  purposes,  if  owned.  These  depreciation  charges  are  usually  made 
at  the  time  statements  are  made  but  by  some  factories  are  made 
monthly  whether  statements  are  made  or  not.  It  also  includes  the 
pro  rata  share  of  the  cost  of  patents  as  well  as  a  proper  charge  for 
patterns  that  have  depreciated,   are  worn  out,   or  are  obsolete. 

These  manufacturing  expenses  are  also  called  factory  expenses  or 
factory  overhead. 

The  prime  cost  plus  the  manufacturing  expenses  equals  the  manu- 
facturing cost,  also   called   the  factory  cost  or   the  cost  of  production. 

The  Sales  Department.  The  goods  when  manufactured  are  turned 
over  to  the  Sales  Department.  They  are  stored  in  warehouses  and  are 
in  charge  of  a  stock  clerk.  These  warehouses  are  usually  known  by 
letters  or.,  numbers  and  a  separate  stock  record  kept  for  each  one.  In 
this  stock  record  of  finished  goods,  the  proper  stock  record  is  debited 
for  all  stock  received  from  the  factory.  When  goods  are  to  be  shipped, 
an  order  is  received  to  ship  stock.  This  is  entered  under  the  proper 
stock  number  as  a  credit  to  that  stock  account.  The  balance  is  then 
found  and  extended  into  a  balance  column.     This  constitutes  a  perpetual 


MANUFACTURING  COSTS  319 

inventory  book  for  finished  goods.  If  a  separate  book  or  sheet  is  kept 
for  each  warehouse,  there  must  also  be  columns  for  Transfers  from 
Other  Warehouses  and  Transfers  to  Other  Warehouses.  The  balance  on 
hand  should  be  checked  up  with  an  actual  count  whenever  the  quantities 
become  low,  or  may  be  checked  at  periodical  intervals,  such  as,  monthly. 

Selling  Expenses.  In  order  to  run  the  Sales  Department,  certain 
expenses  are  necessary.  The  selling  expenses  of  a  manufacturing  busi- 
ness differ  little  from  the  trading  expenses  of  a  mercantile  business. 
They  include  such  expenses  as  advertising,  salesmen's  salaries,  traveling 
expenses,  branch  office  expenses,  agency  expenses,  freight  on  goods  sold, 
incidental  selling  expenses,  and  the  proper  share  of  delivery  expense, 
and  of  insurance  and  taxes  on  finished  goods. 

The  manufacturing  cost  plus  the  selling  expenses  make  the  selling 
cost   of  the  goods  manufactured. 

General  or  Administrative  Expenses.  These  expenses  include  all  ex- 
penses that  are  necessary  expenses  of  running  the  office,  such  as,  sal- 
aries of  officers  and  of  the  office  force,  office  supplies,  telephone  and 
telegrams,  stationery  and  printing,  etc.  It  also  includes  auditors'  and  law- 
yers' fees,  corporation  taxes,  interest,  depreciation  on  furniture  and  fixtures, 
and  any  other  expense  that  is  not  a  manufacturing  or  a  selling  expense. 

The  selling  cost  plus  the  general  expenses  make  the  total  cost. 

Discounts.  There  remain  two  elements,  one  of  cost,  the  other  of  in- 
come, that  have  not  been  explained.  They  are  discount  on  sales  and  dis- 
count'on  purchases.  Bookkeepers  and  accountants  have  never  agreed  on 
the  proper  treatment  of  these  two  elements.  Some  class  both  as  general 
elements;  others,  consider  discount  on  purchases  a  deduction  from  the 
cost  of  the  raw  material,  making  it  a  part  of  the  manufacturing  di- 
vision, and  discount  on  sales  a  deduction  from  the  sales,  making  it  a 
part  of  the  selling  division.  In  this  Manufacturing  Set,  discount  on 
purchases  will  be  considered  as  a  general  income  and  discount  on  sales 
a  selling  element. 

Discount  on  Sales.  This  discount  is  necessary  because  of  com- 
petition and  because  of  trade  customs.  Most  businesses  must  give  the 
discounts  whether  they  wish  to  or  not  if  other  businesses  with  which 
they  are  in  competition  give  them.  For  these  reasons,  discount  on  sales 
will  be  considered  a   deduction   from  sales,   a  part  of   the  selling  division. 

Discount  on  Purchases.  This  will  be  considered  a  part  of  the 
general  division.  Discount  on  purchases  is  a  result  of  the  business  hav- 
ing sufficient  working  capital  on  hand  to  take  advantage  of  the  best 
offers.  Good  discounts  may  be  secured  and  yet  the  business  may  not 
be  able  to  take  advantage  of  them  because  there  is  not  sufficient  cash 
to  do  so.  Or,  the  business  may  borrow  money  in  order  to  take  ad- 
vantage of  its  discounts.  The  interest  charge  for  the  use  of  the  money 
is  a  loss  in  the  general  division  that  would  offset  a  part  of  the  profit 
from  the  discount  on  purchases. 


CHAPTER  XXXVI 
THE  VOUCHER  SYSTEM  OF  ACCOUNTS 


A  Voucher,  in  the  ordinary  business  sense,  is  a  truthful  exhibit  of 
a  business  transaction.  As  the  word  is  used  in  this  connection,  it  has  a 
more  restricted  meaning.  It  refers  to  a  printed  form  that  shows  an 
indebtedness  incurred  and  the  authority  for  paying  the  indebtedness. 
It  usually  includes  a  number  of  other  things  that  will  be  explained 
later. 

The  first  characteristic  of  the  voucher  system  is  the  printed  voucher. 
This  voucher  contains  a  record  of  the  purchase  taken  from  the  invoice 
or  bill  or  a  statement  of  the  services  for  which  the  voucher  is  issued,  if 
no  bill  or  invoice  is  received.  It  contains  in  addition  several  ruled 
places  for  the  signatures  of  different  persons  who  are  authorized  to 
approve  the  voucher.  There  are  usually  places  for  the  approval  of  the 
buyer,  the  superintendent  or  manager,  the  auditor,  and  that  of  some  ex- 
ecutive officer,  such  as,  the  president,  vice-president,  or  secretary. 
This  form  is,  for  this  reason,  a  very  good  one  for  corporations,  as  it 
provides  the  corporation  with  a  sufficient  check  on  the  acts  of  its  agents. 
It  is  used  also  by  partnerships  but  not  so  commonly  except  in  large 
businesses. 

The  payment  of  the  voucher  must  be  considered  with  the  voucher 
itself.  The  old  form  of  the  voucher  contained  besides  a  record  of  the 
indebtedness,  a  receipt,  and  a  check  attached  by  a  perforation.  But 
this  was  a  bulky  paper  and  is  not  used  to  any  extent.  The  voucher 
with  the  receipt  attached  is  still  used  to  a  considerable  extent.  It  is 
illustrated  on  page  321.  The  check  is  an  ordinary  check  numbered 
consecutively  and  also  containing  the  same  number  as  the  voucher  for 
which  it  is  given  in  payment. 

Many  other  forms  have  come  into  use.  The  best  one  as  an  exhibit 
of  an  indebtedness  and  the  payment  of  it  is  the  combined  voucher  and 
check  in  one  paper.  In  this  form,  the  invoice,  the  bill,  or  the  record 
of  the  services  is  recorded  on  the  face  of  the  voucher  with  the  signatures 
of  those  approving  the  voucher.  The  voucher  is  folded  lengthwise,  a 
check  form  is  printed  on  one  side  of  the  back  and  a  place  for  indorse- 
ments on  the  other  side.     When  the  check  is  filled  out  in  payment  of 

320 


THE  VOUCHER  SYSTEM  OF  ACCOUNTS 
Voucher  with  Receipt  Attached 


321 


Voucher  , 

no.     2-igr 


Milwaukee,  Wis.,   V~a^^?^  Z^19-=L 


The  Stein  Lumber  Co. 


To  /fU, 


&£ 


Terms 


.  uLdZ£*£d!LtL^LaL/ 


/^rz^^^ytp '(?-;  Dr. 


Ld^J2^22. 


La. 


Ifr^^A^A^     7JT*. 


yjFXf. 


Correct 


//^  Pres.  — — tt -Tre|is>><=  ^ 


Auditor 


£&££* 


U^^^^^^^£/^L/<  Z>^  /  2-1  fl  — 


Received  of  THE  STEIN  LUMBER  CO. 


JP£&^-e^y^^^^^y>^^y^^^3^  ~^T' 


'S?/-fS* 


Dollars 


in  full  of  above  account. 


^7/ 


322 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Voucher  Stub 


t^^r^A  y 


&  /  /  2-S~.  o  o 


Amount 
Discount 

Amount  Paid  $  /  /    O    2~~.  t  TO 

Date  PaM     //faz^f^flsA S  /  2-,      19_=L. 


Charge 


Amount 


the  voucher  and  indorsed  by  the  payee  it  becomes  a  receipt  in  full  for 
the  voucher  on  its  face.  This  furnishes  the  best  possible  voucher  of  an 
indebtedness  and  its  payment.  The  only  objection  to  it  is  that  the 
check  to  be  deposited  is  a  double  sheet  and  is,  for  that  reason,  a  little 
harder  to  handle  than  the  or- 
dinary  check. 

Because  this  form  is  rather 
bulky  to  handle,  many  firms 
prefer  to  use  a  check  that  is 
not  written  on  the  back  of  the 
voucher.  The  voucher  itself  is 
sometimes  not  returned  when 
the  form  without  the  check  is 
used.  To  avoid  both  of  these 
objections,  some  firms  prefer  to 
make  out  the  voucher  in  the 
usual  way  but  to  keep  it  on  file. 
With  the  check,  attached  by  a 
perforation,  a  memorandum  of 
the  indebtedness  is  sent.  Be- 
fore depositing  the  check,  this 
memorandum  is  torn  off.  If  the 
check  is  not  for  the  correct 
amount,  the  memorandum  and 
the  check  are  returned  to  the 
sender.  If  it  is  correct,  it  is 
deposited  in  the  usual  way.  On 
the  back  of  the  check  on  the 
left  hand  end  a  statement  simi- 
lar to  the  following  is  printed: 
"  No  receipt  is  necessary.  The  in- 
dorsement of  this  check  consti- 
tutes a  receipt  in  full.  If  it  is  not 
correct,  return    it    unchanged." 

A  voucher  check  of  a  dif- 
ferent kind  is  used  with  or  with- 
out the  other  features  that  ac- 
company the  voucher  system. 
It  is  a  check  that  contains  a 
short  statement  of  the  indebt- 
edness for  which  the  check  pays. 
This  statement  may  be  in  the 
lower  left  hand  corner  of  the 
face  of  the  check  or  on  the  left 


Sundry  Accounts 

Manufacturing  Costs 

Material  Purchases  . 
Freight  In 

Productive  Labor .    . 
Fuel,  Light  and  Power 
Unproductive  Labor . 
Supplies   ..... 

Selling  Expenses 

Salesmen's  Salaries 
Salesmen's  Trav.  Ex 
Advertising  .    .    . 
Shipping  .... 
Delivery  Expense. 

General 

Office  Salaries  .    . 
Misc.  Office  Ex.  . 


//IS'— 


/  /  ZS'— 


hand  end  just  above  the  place  for  indorsements.     In   either   form  there 


THE  VOUCHER  SYSTEM  OF  ACCOUNTS 


323 


is   a   statement    on    the    back   above    the   place  for  indorsements  similar 
to  the  one  on  page  324. 

The  Voucher  Stub.     The  voucher  is  usually  attached  to  a  stub  which 
contains  details  of  the  voucher  as  well  as  a  list  of  the  principal  accounts 

Face  of  Combined  Voucher  and  Check 


Voucher 

No.   *£yf- 


C*  L*  Lowe  Company 


i^Z^33^^2^^SLdd£^  //f^^n 


Terms:  //<7 ,    -A&& 


'-T 


^=Cl9— 


r^r?y* 


President 


of   the   business   to   which   the   different   items    of   the   voucher   are    dis- 


324 


METROPOLITAN  SYSTEM  OP  BOOKKEEPING 


Back  of  Combined  Voucher  and  Check 


First  National  Bank 


Voucher  Nc^ZZl 

Pay  to 

the  order  of  Jl 


Chicago,  in.,  s/ZiaA^zS/h  19.ZZ. 


TZXzsrftrmS ■YHTn g^L s;  //  a  2- 


<S~o 


fe£q>Z  y^^^sw^yt^^f^fssrr'  a^n^y  /<™ 


'  Dollars 

In  full  payment  of  the  account  as  shown  on  the  reverse  side  of  this 
Voucher  Check. 


By- 


Treasurer 


Back  op  Voucher  Check  when  no  Voucher  Statement  is  Used 


V    1 

.1   s? 


THE  VOUCHER  SYSTEM  OP  ACCOUNTS  825 

tributed.  This  facilitates  the  making  of  the  entry  for  the  voucher. 
The  voucher  stub  is  illustrated  on  page  322  in  connection  with  the  com- 
bined   voucher   statement   and   check. 

The  Voucher  Record.  Another  important  feature  of  the  voucher 
system  is  the  use  of  a  voucher  record  as  a  book  of  original  entry.  It 
is  more  than  a  purchase  book,  because  it  contains  in  addition  to  a 
record  of  purchases,  a  record  of  all  other  indebtedness  incurred.  It 
also  contains  distributive  columns  corresponding  to  the  principal  ac- 
counts listed  on  the  voucher  stub.  This  makes  it  possible  to  classify 
the  principal  accounts  into  manufacturing,  selling,  and  general.  It  also 
eliminates  a  great  deal  of  posting  as  much  of  the  posting  from  this 
book   can   be  done  in  total.     (See  illustration  on  pages  326  and  327.) 

The  voucher  record  is  used  for  all  indebtedness  incurred,  except 
petty  cash  items,  which  are  entered  in  total  at  certain  regular  intervals. 
The  effect  of  an  entry  in  the  voucher  record  is  in  each  case  a  credit  to 
Vouchers  Payable  and  a  debit  to  the  account  or  accounts  represented 
by  the  column  or  columns  in  which  the  amounts  are  distributed.  If 
an  account  is  to  be  debited  for  which  a  special  column  is  not  kept,  the 
name  of  the  account  is  written  in  the  Sundry  Accounts  column,  and 
posted  daily.  This  is  true  of  such  accounts  as  Notes  Payable,  Ileal 
Estate,   Delivery   Equipment,   Furniture   &   Fixtures,   etc. 

Nothing  is  posted  from  the  voucher  record  daily  except  the  accounts 
in  the  Sundry  Accounts  column.  These  accounts  are  posted  to  the 
debit  daily.  The  total  of  the  Vouchers  Payable  column  is  posted  monthly 
to.  the  credit  of  the  Vouchers  Payable  account  and  the  totals  of  the  other 
amount  columns,  except  the  Sundry  Accounts  column,  are  posted  to  the 
debit  of  the  respective  accounts  named  at  the  head  of  the  column.  The 
method  of  closing  the  voucher  record  is  shown  in  the  illustration  on 
pages  326  and  327. 

How  to  Enter  Vouchers.  A  voucher  is  made  out  for  every  indebt- 
edness incurred.  It  is  entered  in  the  voucher  record  as  soon  as  it  is 
made  out,  the  distribution  being  made  from  the  voucher  stub.  If  it 
is  a  cash  voucher,  a  check  is  made  out  at  once.  The  voucher  and 
check  are  torn  from  the  stub  and  sent  to  the  party  to  whom  payment 
is  to  be  made.  If  the  voucher  is  not  yet  due,  it  is  made  out  in  the. 
usual  way  and  entered  in  the  voucher  record,  but  is  not  torn  from  the 
stub.  When  payment  is  made,  the  voucher  and  check  are  torn  from 
the  stub  and  sent  to  the  party  to  whom  payment  is  to  be  made. 

Whenever  payment  is  made,  the  Date  Paid  column  of  the  voucher 
record  is  filled  in  with  the  date  of  payment. 

Most  vouchers  are  paid  in  cash,  but  some  are  paid  wholly  or  partly 
by  giving  a  note  or  mortgage.  In  that  case  a  J  is  placed  before  the 
date  in  the  Date  Paid  column. 

Purchase  Ledger  Eliminated.     The    voucher    record    eliminates    the 


326 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 
Voucher 


NAME 

ADDRESS 

TERMS 

SUNDRY  ACCTS 

MANU- 

VCH. 
NO. 

DATE 

DATE 
DUE 

DATE 
PAID 

VCHRS. 
PAYABLE 

F 

ACCT. 

AMT. 

MAT- 
ERIAL 
PUR. 

585 
586 
587 
588 
589 

19— 
June 

28 

29 

29 
■30 

30 

Forward 
J.  C.  Connell 
C.  Frey  &Co. 
Hall  Adv.  Co. 

C.  Harris 

D.  Jones 

Grand  Rapids 

City 

City 

Petty  Cash 

Pay  Roll 

2/10,n/30 
Cash 
n/30 
Cash 
Cash 

19— 
July 
June 
July 
June 
June 

8 

29 
29 
30 
30 

19— 

June  29 

June  30 
June  30 

12848 

1718 

125 

375 

21 

3813 

to 

50 
50 

9 

Ins. 

U6 
125 

3d 
50 

738650 
171820 

(12) 
18901 

20 

V 
5hl 

7-5 

(18) 
910k 

70 

purchase  ledger  as  accounts  are  not  opened  up  for  creditors.  The  entry 
to  record  the  purchase  corresponds  to  a  credit  to  the  account  and  the 
record  in  the  Date  Paid  column  corresponds  to  the  debit  to  the  ac- 
count. Where  it  is  desired  to  keep  accounts  with  certain  creditors,  the 
business  may  do  so.  In  that  case,  they  are  memorandum  accounts  to 
give  additional  information  and  are  not  a  necessary  part  of  the  ac- 
counting system. 

The  Cash  Book.     The    cash    book    of    a    voucher    system    need    not 
differ    much    from    the    cash    book    of    an    ordinary    mercantile    business, 

Cash  Receipts 


date 

19— 


ACCOUNT 


EXPLANATION 


GEN. 


ACCTS. 
RECEIV- 
ABLE 


DISC 
ON 

SALES 


IN- 
TEREST 
DR. 


national 
exch'ge 

BANK  DR. 


May 

25 

26 

16 

27 

20 

29 

18 

29 

22 

30 

15 

31 

17 

31 

31 

V 

31 

16 

31 

28 

31 

29 

31 

u 

31 

V 

.June 

1 

Forward 
J.C.  Dreher 
C.  L.  Loring 
Notes  Rec.Disc 
Interest 
Newton  &  Co. 
Notes  Payable 

Balance,  May 


Inv.  of  4/26 
Inv.of  5/18,  3% 
M.E.  Irwin' 's  note 
60  da.  on  above 
Inv.of  5/20,  2% 
Our  note  disc. 


General  Cr. 

Accounts  Receivable  Cr. 

Disc,  on  Sales   Dr. 

Interest  Dr. 

National  Exchange  Bank  Dr. 

Bank  Dr. 


Balance 


In  Bank 


472635 


575 
575 


1000 
6307 


215725 


414985 


414985 
659390 


1074375 


384332 


521620 
31625 
43645 


625— 


W 


659390 


659390 


7985 
1309 

1250 


10544 


105 


44 


2050 


94 


2744 


27 


U 


984220 
31625 
42336 

57881 
61250 
995— 


1276812 
215725 


1061087 


10544 

2744 
1061087 

1074375 
12768U 


12768 


384332 


hi 


THE  VOUCHER  SYSTEM  OP  ACCOUNTS 


327 


Record,  June  28-30,  19— 


FACTORING  COST 

BELLING   EXPENSES                             II      GEN.  EXPENSES 

PRO-      1 
DUCTIVE 
LABOR 

MANUFACTURING  EXPENSES 

sales- 
men's 

SALS. 

sales- 
men's 

T.  EXP. 

ADVER- 
TISING 

SHIP- 
PING 

DE-      | 
LIVERY 
EXP. 

OFFICE 
SAL- 
ARTKS 

MISC. 

FRT.  IN 

Fuel,  Light 
and  Power 

Unproductive 
Labor 

Supplies 

OFFICE 
EXP. 

35 

4340 

sou 

80 

25 

31 2 
120 

m 

95 
173 

75 

U 

60 

150 

75 

375 

— 

60 
70 

15251 

785 
80  — 

175 

47 
IS 

50 

65 

(18) 
85 

— 

(19) 
7385 

05\ 

(20) 
432 

20 

(21) 
268 

75 

(22) 

60 

(24) 
150 

J 

(24) 

75 

— 

(25) 
375 

— 

(25) 
130 

(26) 
103 

10 

(26) 
175 

— 

(27) 
61 

15 

such  as  that  illustrated  in  Set  VII,  except  that  the  entries  on  the  Cash 
Payments  are  recorded  in  a  different  way.  In  the  entry  on  the  Cash 
Payments,  the  number  of  the  voucher  paid  is  more  important  than  the 
name  of  the  person  to  whom  payment  is  made  or  the  purpose  for  which 
payment  is  made.  These  have  been  fully  shown  in  the  entry  in  the 
voucher  record.  For  these  reasons,  the  voucher  number  is  written  first, 
followed  by  the  name  of  the  person  to  whom  payment  is  made.  Noth- 
ing is  posted  daily  from  the  Cash  Payments,  but  the  columns  are 
posted  in  total. 

Cash  Payments 


DATE 
19— 

F 

VOUCHER 
NUMBER 

TO   WHOM   PAID 

VOUCHERS 
PAYABLE 

DISCOUNT 

ON 
PURCHASES 

NATIONAL 
EXCHANGE 
BANK  CR. 

May 

25 
26 
27 
28 
29 
30 
31 

31 

31 
31 

31 
31 

V 
V 
V 
V 
V 
V 

17 

28 

U 

V 

Forward 
V.  No.  385 
437 
438 
372 
439 
440 

Vouchers  Pay. 
Disc,  on  Pure 
National  Exch 

Bank  Cr. 
Balance 

D.  Janis  &  Co. 
Auto  Supply  Co. 
D.  May,  Cashier 
BellAdv  Co. 
D.  Wendt 
D.  May,  Cashier 

Dr. 

hases  Cr. 
ange  Bank  Cr. 

In  Bank  (red  ink) 

6127 

412 

21 

24 

172 

125 

2172 

15 

30 
25 
35 
50 

25 

121 
8 

75 
25 

6005 

404 

21 

24 

172 

125 

2172 

40 
05 
25 
35 
50 

25 

9054 

80 

130 

— 

8924 

80 

9054 

80 

130 
8924 

80 

9054 

80 

9054 

80 

May 

8924 
3843 

80 

32 

12768 

12 

, 

328  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Many  firms  prefer  to  keep  an  account  with  the  bank  in  the  cash 
book.  This  is  posted  monthly.  All  cash  is  received  and  deposited 
daily,  with  the  sum  of  the  amounts  received  carried  to  the  Bank  column 
of  the  Cash  Receipts  daily.  For  each  check  written,  the  amount  is 
carried  to  the  Bank  column  of  the  Cash  Payments.  The  daily  posting 
of  the  Cash  Receipts  is  the  same  as  in  Part  III.  The  proper  method 
of  closing  the  cash  book  is  illustrated  in  the  cash  book  shown  on  pages 
326  and  327. 

The  Journal.  The  four-column  journal,  consisting  of  the  following 
amount  columns,  will  again  be  used:  Vouchers  Payable,  General  Dr., 
General  Cr.,  and  Accounts  Receivable. 

The  Petty  Cash  Book.  A  petty  cash  book  will  be  used  for  petty 
cash  payments.  A  fund  of  a  definite  sum,  $50,  for  example,  is  given  to 
some  one  who  is  to  make  small  payments  for  which  checks  are  not 
issued.  When  he  makes  a  payment,  he  records  it  in  a  Petty  Cash  Book 
under  the  proper  heading.  At  periodical  intervals,  for  example,  weekly, 
he  makes  a  report  to  the  general  bookkeeper  of  his  expenditures,  prop- 
erly classified.  Suppose  the  sum  is  $26.  A  voucher  is  then  made  out 
for  this  amount  to  bring  his  fund  up  to  the  original  amount  again. 
It  is  entered  on  the  Cash  Payments  as  Voucher  No. — ,  Cashier,  $26. 
On  -the  voucher  record  it  is  properly  distributed  to  the  accounts  af- 
fected.    This  is  called  the  Imprest  System. 

Voucher  Record  Proof.  At  the  end  of  the  month  before  the  totals 
of  the  voucher  record  are  posted,  the  sum  of  the  Vouchers  Payable 
column  should  equal  the  sum  of  the  distributive  columns.  After  the  totals 
have  been  posted  from  all  the  books,  a  schedule  of  the  vouchers  unpaid 
should  be  made  and  the  total  found.  This  total  should  agree  with  the 
balance  of  the  Vouchers  Payable  account. 

The  Vouchers  Payable  account  should  show  a  credit  from  the 
voucher  record  and  debits  from  the  cash  book  and  journal.  If  the 
balance  of  the  Vouchers  Payable  account  does  not  agree  with  the  sum 
of  the  unpaid  vouchers,  the  paid  vouchers  must  be  checked  with  the 
payments  in  the  cash  book  and  journal.  The  vouchers  unpaid  should 
also  agree  with  the  vouchers  attached  to  the  stubs  in  the  book  of 
vouchers. 


CHAPTER  XXXVII 
MANUFACTURING 


SET  IX 

Transactions  for  January 

Selling  Price 

List 

NO. 

KIND 

PRICE 

205 

Galvanized  Refrigerator 

$4.35 

210 

u 

u 

5.25 

215 

a 

u 

7.45 

220 

u 

u 

8.85 

225 

a 

u 

9.50 

250 

u 

a 

10.85 

255 

a 

u 

11.65 

260 

a 

u 

12.85 

315 

Enameled 

a 

9.05 

320 

u 

a 

10.35 

325 

u 

a 

11.15 

350 

a 

a 

12.75 

355 

a 

u 

13.95 

360 

u 

a 

15.25 

450 

Porcelain 

u 

19.85 

455 

u 

a 

23.35 

460 

u 

a 

26.25 

150 

Kitchen  Cabinet 

11.35 

The  Objects  of  this  set  are  to  illustrate  the  voucher  system  of  ac- 
counting for  a  corporation  doing  a  manufacturing  business,  and  to 
make  the  student  familiar  with  the  accounts  of  a  manufacturing  busi- 
ness. 

The  Books  of  Entry  will  be  the  sales  journal,  the  cash  book,  the 
special-column  journal,  the  voucher  record,  and  the  petty  cash  book.  Two 
ledgers  will  be  used,  the  general  and  the  sales  ledgers.  The  use  of  each 
of  these  books  has  been  fully  illustrated  and  explained  in  the  previous 
chapters. 

Outgoing   Papers.      The   student    has    been    given    sufficient    drill   in 

329 


330  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

the  making  out  of  the  ordinary  business  papers.  He  has  also  had  suffi- 
cient drill  in  the  use  of  the  incoming  papers.  In  this  set,  nothing  but 
vouchers  need  be  made  out.  When  a  sale  is  made,  an  invoice  is  sup- 
posed to  be  made  out  in  duplicate.  If  the  teacher  desires,  the  out- 
going invoices  may  be  made  out.  t  For  posting  purposes,  the  entry  is 
made  in  the  sales  journal.  All  vouchers  are  made  out  as  illustrated  in 
Chapter  XXXVI  and  handled  as  there  illustrated.  Sign  all  voucher 
checks  for  the  treasurer  by  your  name  underneath. 

TRANSACTIONS 

January  2.  B.  C.  Ecker,  D.  E.  Rowland,  C.  B.  Roberts,  and  H.  A. 
Maxwell  have  decided  to  organize  a  corporation  under  the  name  of  the 
Ecker  Manufacturing  Co.  The  capital  stock  is  to  be  $50000  divided 
into  500  shares  of  the  par  value  of  $100  a  share.  The  purpose  of  the 
corporation  shall  be  the  manufacture  and  sale  of  refrigerators,  kitchen 
cabinets,   and  other  furniture. 

The  incorporators  have  subscribed  for  stock  as  follows: 

B.  C.  Ecker,  150  shares 
D.  E.  Rowland,  100  shares 

C.  B.  Roberts.  75  shares 
H.  A.  Maxwell,  50  shares 

The  rest  of  the  stock  is  unsubscribed. 

The  necessary  steps  have  been  taken  to  incorporate  under  the  laws 
of  the  state  of  Wisconsin,  and  a  certificate  of  incorporation  has  been 
received  from  the  Secretary  of  Stater 

The  incorporators  have  elected  themselves  members  of  the  board  of 
directors.  The  directors  have  elected  the  following  officers:  B.  C. 
Ecker,  President;  C.  B.  Roberts,  Secretary;  H.  A.  Maxwell,  Treasurer. 

The  student  is  employed  to  act  as  bookkeeper  and  cashier  at  a 
monthly  salary  of  $80. 

The  secretary  has  instructed  you  to  make  memorandums  in  the 
journal  to  record  the  organization  of  the  corporation,  the  subscription 
of  the  stock,   the  election  of  the  board  of  directors,  and  of  the  officers. 

Make  an  entry  in  the  journal  to  record  the  organization  of  the 
corporation,  with  a  list  of  the  subscribers  and  the  details  of  the  num- 
ber of  shares  subscribed  by  each. 

Remember  that  Capital  Stock  must  be  credited  for  the  authorized 
capital  stock  and  that  Subscriptions  cannot  be  debited  for  any  more 
than  the  total  amount  subscribed. 

In  most  states,  only  a  part  of  the  capital  stock  must  be  subscribed 
for  and  paid  in  before  the  corporation  may  do  business. 

The  subscribers  have  paid  their  subscriptions  as  follows:  B.  C. 
Ecker,  150  shares,  $15000;  D.  E.  Rowland,  100  shares,  $10000;  C-  B. 
Roberts,  75  shares,  $7500;  H.  A.   Maxwell,  50  shares,  $5000. 


MANUFACTURING  331 

Make  an  entry  in  the  cash  book  showing  the  details  of  the  cash 
received. 

Deposit  all  cash  received  in  the  National  Exchange  Bank.  Show 
this  by  carrying  the  amount  received  over  to  the  Bank  column  of  the 
cash  book. 

Daily  all  the  cash  received  is  supposed  to  be  deposited  in  the  bank 
and  the  amount  of  the  deposits  for  that  day  are  carried  to  the  Bank 
Deposits   column   of   the   cash   book. 

By  action  of  the  board  of  directors  recorded  on  page  5  of  the 
Minute  Book,  the  corporation  has  purchased  land  and  a  factory  build- 
ing located  at  1232-8  North  Avenue,  Milwaukee,  from  the  Peters 
Manufacturing  Company,  for  $20000  cash.  The  land  is  appraised  at 
$6000  and  the  building  at  $14000. 

Take  your  book  of  vouchers  and  fill  in  the  stub  and  the  voucher. 
Under  Sundry  Accounts  in  the  distribution  wri^te,  Real  Estate:  Land, 
$6000;  Buildings,  $14000.  Tear  the  voucher  from,  the  stub,  fold  it 
lengthwise,  and  write  out  the  check  on  the  back  in  payment.  Number 
both  the  voucher  and  the  check,  No.   1. 

Enter  the  voucher  in  the  voucher  record.  Under  Sundry  Accounts 
write  the  distribution  given  on  the  voucher  stub.  Use  but  one  line  for  this 
voucher.     Study  the  form  of  the  entry  as  illustrated  on  pages  326  and  327. 

Enter  the  payment  of  this  voucher  in  the  Date  Paid  column  of  the 
voucher  record  and  make  the  entry  in  the  cash  book. 

Post  all  the  entries  that  should  be  posted.  Open  accounts  in  the 
general  ledger,   as  follows: 

ACCOUNT  '  PAGE 

Capital  Stock  1 

Subscriptions  1 

Unsubscribed  Stock  1 

Surplus  2 

Real  Estate  2 

Machinery  2 

Tools  and  Equipment  3 

Delivery  Equipment  3 

Furniture  and  Fixtures  3 

Patents  4 

Notes  Receivable  4 

Accounts  Receivable  4 

C.  D.   Masters,  Salesman  5 

Inventory,  Raw  Material  and  Finished  Goods  5 

Petty  Cash  5 

National  Exchange  Bank  6 

Mortgages  Payable  6 

Notes  Payable  6 


332                      METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

ACCOUNT  PAGE 

Vouchers  Payable  7 

Notes  Receivable  Discounted  7 

Reserve  for  Depreciation,  Buildings  7 

Reserve  for  Depreciation,  Machinery  8 

Reserve  for  Depreciation,  Tools  and  Equipment           8 

Reserve  for  Bad  Debts  8 

Material  Purchases  9 

Freight  In.  9 

Productive  Labor  9 

Fuel,  Light  and  Power  10 

Factory  Supplies  10 

Unproductive  Labor  >      10 

Repairs  to  Machinery,  Tools  and  Equipment               11 

Repairs  to  Building  11 

Refrigerator  Sales  11 

Kitchen  Cabinet  Sales  12 

Salesmen's  Salaries  12 

Salesmen's  Traveling  Expenses  12 

Advertising  13 

Shipping  Expense  13 

Delivery  Expense  13 

Discount  on  Sales  14 

Office  Salaries  14 

Miscellaneous  Office  Expense  14 

Insurance  15 

Collection  and  Exchange  15 

Interest  15 

Discount  on  Purchases  16 

Accrued  Asset  Inventories  16 

Accrued  Liability  Inventories  16 

Manufacturing  17 

Selling  18 

Profit  and  Loss,  one-half  page  19 

Dividend  19 

Reserve  for  Accidents  19 

Open  accounts  in  the  sales  ledger,  as  follows: 

ACCOUNT  PA6E 

C.  N.  Noble  20 

C.  L.  Yoder  20 

L.  C.  Prey  &  Co.  20 

J.  A.  Dreher  &  Co.  20 

B.  E.  Derby  20 

C.  O.  D.  Account  20 


MANUFACTURING  333 

ACCOUNT  PAGE 

D.  E.  Bolting  21 

C.  F.  Gorrel  21 

J.  E.  Brock  21 

C.  L.  Voss  21 

D.  C.  Harvey  21 

B.  N.  Rarden  21 

C.  N.  Yahr  22 

D.  G.  Loucks  22 
C.  D.  Caldwell  &  Co.  22 

F.  A.  Somers  22 
N.  D.  Garvey  22 
C.  A.   McKinney  22 

G.  A.  Bower  22 

January  8.  Bought  an  invoice  of  machinery  for  the  wood  work- 
ing shop  and  a  forge  and  anvils  for  the  blacksmith  shop,  from  the 
Hilton  Mfg.  Co.,   Milwaukee,  for  $5750.     Terms:  n/30. 

Fill  out  voucher  stub  No.  2  and  the  voucher.  Distribute  it  un- 
der the  head  of  Machinery.  Do  not  tear  the  voucher  from  the  stub  as 
the  voucher  is  not  to  be  paid  at  once.  Enter  the  voucher  in  the 
voucher  record,  writing  Machinery  under  Sundry  Accounts.  Do  not 
mark  it  paid  nor  make  an  entry  in  the  cash  book. 

Bought  an  invoice  of  tools  and  hardware  from  the  Ball  Hardware 
Co.,  Milwaukee,  Wis.,  as  follows:  Tools,  $457.50;  hardware,  $212.75. 
Terms:  n/10. 

Make  out  the  voucher  stub  and  the  voucher  but  do  not  detach 
the  voucher.  Make  an  entry  in  the  voucher  record.  In  the  Materials 
column  write,  $212.75.  In  the  Sundry  Accounts  column  on  the  same 
line,  write,  Tools,  $Jf.57.50.  Put  the  total  amount  of  the  invoice  in 
Vouchers  Payable  column. 

Bought  an  invoice  of  lumber*  from  the  Mann  Lumber  Co.,  Osh- 
kosh,  Wis.,  as  follows: 

15  M  ft.  Oak  Lumber  at  $75 
8   M  ft.   Ash   Lumber  at  $41.50 
5   M  ft.   White  Pine   Lumber  at  $35 

Terms:     2/10,   n/30.' 

Each  time  an  indebtedness  is  incurred,  except  for  small  items  of 
petty  cash,  you  must  fill  out  a  voucher  stub,  a  voucher,  and  make  the 
entry  in  the  voucher  record,  without  special  instructions.  If  the  voucher 
is  a  cash  voucher,  you  must  also  write  out  the  check,  fill  in  the  date 
paid  on  the  voucher  record,  and  make  an  entry  in  the  cash  book. 

The  lumber  purchased  is-  to  be  used  in  the  manufacture  of  refriger- 
ators.    Charge  it  to   Material  Purchases. 

Pay  the  freight  on  this  invoice  of  lumber  by  voucher  check  in  favor 
of  the  C.  &  N.   W.   R.   R.   Co.,  $147.50. 


334  METROPOLITAN  SYSTEM  OP  BOOKKEEPING 

This  requires  a  voucher  and  an  entry  in  the  voucher  record  just  as 
much  as  if  goods  had  been  purchased,  as  it  is  an  indebtedness  incurred. 

Post  all  items  that  should  be  posted  daily  without  further  instruc- 
tions. 

January  5.  C.  D.  Perkins  has  been  engaged  as  manager  of  the 
factory  at  a  salary  of  $150  per  month.  Workmen  have  been  employed 
for  the  different  operations  in  the  factory.  The  details  of  each  work- 
man's work  and  his  wages  would  be  kept  on  a  time  sheet  or  on  time 
cards.  No  memorandum  is  necessary.  Make  a  memorandum  of  the 
employment  of  C.   D.   Perkins  as  manager. 

The  corporation  finds  it  necessary  to  have  on  hand  a  sum  of  money 
from  which  small  cash  payments  may  be  made.  The  Student  is  to  be 
given  a  petty  Gash  fund  of  $50  for  this  purpose.  Entries  for  receipts 
and  payments  from  this  fund  will  be  made  in  a  petty  cash  book. 
Weekly  the  Student  will  report  the  expenditures  to  the  treasurer  and 
be  given  a  check  for  the  total  amount  expended  so  as  to  bring  the 
fund  up   to   $50  again. 

Make  out  a  voucher  in  favor  of  yourself  for  $50  and  charge  it  to 
the  Petty  Cash  fund  in  the  Sundry  Accounts  column.  Enter  it  to  the 
debit  of  cash  in  the  petty  cash  book. 

Bought  of  the  Western  Coal  Co.,  50  tons  Steam  Coal  at  $4.45. 
Terms:  n/30.  Make  the  proper  entry  for  this  transaction  as  directed 
in   previous   transactions. 

January  6.  It  was  found  necessary  to  make  some  alterations  in  the 
building  to  make  it  suitable  for  the  machinery  and  equipment.  The 
roof  was  thought  to  be  in  good  condition  when  the  building  was  pur- 
chased but  it  was  found  that  it  needed  repairs.  The  Logan  Construc- 
tion Co.  has  done  the  work  and  presented  a  bill  for  work  as  follows: 
Alterations  to  factory  building,  $120.75;  repairs  to  roof  of  factory 
building,   $17.50. 

Pay   this  bill  by  voucher  check. 

Are  both  of  these  items  charges  to  the  same  account?  The  alterations  are  made  necessary  to 
fit  the  building  for  the  company's  use.  The  other  item  is  made  necessary  because  the  building  is  not 
in  as  good  condition  as  it  was  thought  to  be.     Use  but  one  line  but  use  two  distribution  columns. 

Bought  a  bill  of  office  books  and  stationery  from  H.  H.  Miller  & 
Co.,  City,  as  follows:  1  Cash  Book,  300  pages,  $3.50;  1  Journal,  150 
pages,  $2;  1  Voucher  Record,  300  pages,  $8;  1  Ledger  Binder,  $9;  1 
Sales  Binder,   $3;  500  ledger  sheets,  $1.50;  500  sales  sheets,   $2. 

Pay   this   bill   by   voucher   check. 

Bought  incidental  office  supplies  for  cash,   $8.50. 

This  should  be  entered  in  the  petty  cash  book  only. 

January  7.  Bought  an  invoice  of  galvanized  iron  and  mineral  wool 
from  the  National  Iron  Co.,  City,  amounting  to  $718.25,  on  the  terms, 
2/10,   n/30. 

The   Andree   Electric   Co.  presents  a   bill   for   wiring   and   connecting 


MANUFACTURING  335 

the  machinery,  etc.,  as  follows:     Wiring,  $25.75;  Lamps,  $15.05. 

Pay  this  bill  by  voucher  check.  Charge  it  to  Tools  and  Equip- 
ment. 

Bought  an  invoice  from  the  Patton  Paint  Co.,  Chicago,  as  follows: 
25  gal.  Stain  at  $1.75;  25  gal.  Varnish  at  $2.35;  10  gal.  White  Enamel 
at  $2.05.     Terms,   n/30. 

Pay  a  freight  bill  of  the  C.  M.  &  St.  P.  R.  R.  Co.  by  voucher  check, 
$12.75.     This  bill  is  for  the  invoice  of  paints  just  received. 

Took  out  an  insurance  policy  in  the  Phoenix  Insurance  Company, 
for  one  year,  on  the  building,  machinery,  tools,  and  equipment,  and  on 
any  raw  material  and  finished  goods  on  hand,  as  follows:  Building, 
$9500;  Machinery,  $4000;  Tools  and  Equipment,  $400;  Raw  material, 
$1500;  and  Finished  goods,  $2000. 

Pay  the  premium  by  voucher  check  in  favor  of  H.  M.  Russell  & 
Co.,  at  the  rate  of  75ff  for  each  $100  of  the  risk. 

January  8.  Pay  cash  for  telegrams,  75^;  sundry  office  supplies, 
$4.75. 

Bought  a  motor  truck  from  the  Davidson  Motor  Co.  for  $1750. 
Pay  for  it  by  voucher  check. 

Entered  into  a  contract  with  the  Hall  Advertising  Co.  to.  advertise 
our  line  of  Economy  refrigerators,  for  $1500,  with  the  privilege  of  plac- 
ing as  much  each  month  as  is  found  necessary.  Terms:  3%  for  cash, 
n/60. 

Pay  the  bill  by  voucher  check.  Deduct  the  discount  on  the  voucher 
and  write  the  check  for  the  net  amount.  Do  not  enter  the  discount  in 
the  cash   book. 

Insured  the  motor  truck  in  the  Mutual  Insurance  Co.,  for  $1400, 
for  one  year,  at  the  rate  of  65j£  for  each  $100. 

Pay  for  it  by  voucher  check  in  favor  of  D.  Evans  Insurance  Co. 

Bought  an  invoice  of  zinc  from  the  A.  R.  Hansen  Co.,  Chicago, 
per  itemized  bill  amounting  to  $736.45.     Terms:     2/10,  n/30. 

January  9.  The  Broadway  Printing  Co.  has  just  delivered  1000 
catalogs  to  advertise  the  line  of  refrigerators  the  corporation  is  manu- 
facturing.    This  is  a  cash  bill  for  $175. 

Pay  it  by  voucher  check. 

C.  D.  Masters  has  been  hired  as  traveling  salesman  at  a  salary  of 
$150  per  month  and  expenses,   to  begin  January   10. 

Give  him  a  voucher  check  for  $100  for  traveling  expenses.  Charge 
it  to  C.  D.  Masters,  Salesman.  This  is  to  be  treated  as  an  advance 
fund  to  him.  When  he  reports  his  expenditures  for  traveling  expenses,  he 
will  be  given  a  check  for  the  amount  expended.  The  $100  is,  there- 
fore, a  permanent  fund  which  is  like  petty  cash,  and  remains  the  same 
on  the  books. 


336  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Bought  supplies  for  the  factory  of  the  Sanders  Supply  Co.,  City,  as 
follows:      Machine   oil,    $8;   waste,    $2. 

Pay  this  bill  by  voucher  check. 

January  10.  Bought  of  C.  Shaw  &  Co.:  1  Combination  Desk, 
$36;  3  Office  Chairs,  $15;  1  Underwood  Typewriter,  $100;  1  Filing 
Cabinet,   $27.50. 

Pay  the  bill  by  voucher  check. 

The  A.  N.  Miller  Co.  has  manufactured  to  our  order  300  porcelain 
linings  for  refrigerators:  150  at  $5.25;  100  at  $7.50;  50  at  $9.25.  Terms: 
1/10,  n/30. 

Bought  of  the  Parker  Auto  Co.,  100  gal.  gasoline  at  12jzL  Pay  for 
it  by  voucher  check. 

Find  the  sum  of  your  petty  cash  payments  to  date  according  to 
the  accounts  affected.     Balance  the  petty  cash  book. 

Make  out  a  voucher  check  in  your  favor  for  the  expenditures  from 
the  Petty  Cash  fund.  Enter  it  in  the  voucher  record  as  paid  and  on  the 
payments  side  of  the  cash  book.  The  voucher  check  is  cashed  and 
the  amount  is  entered  as  cash  received  in  the  petty  cash  book. 

January  12.  The  management  has  decided  to  manufacture  three 
kinds  of  refrigerators,  graded  as  to  the  interior  finish,  the  kind  of  wood 
used  in  the  box,  and  the  size.  The  refrigerators  with  galvanized  iron 
lining  will  be  numbered  in  the  200  's;  the  enameled  refrigerators,  in  the 
300 's;  and  the  porcelain-lined,  in  the  400 's.  The  second  and  third 
numbers  indicate  the  size  and  kind  of  box,  as,  225,  a  galvanized  iron 
refrigerator,  with  an  oak  box,  size,  48  in.  by  28  in.  by  12  in. 

The  selling  prices  of  the  different  kinds  of  refrigerators  are  given  at 
the  beginning  of  this  set,  on  page  329.  Copy  this  selling  price  on  a  sheet 
of  heavy  paper  or  cardboard  and   place  it  in  your  envelope  of  supplies. 

The  directors,  a  few  days  ago,  decided  to  take  subscriptions  for  the 
remainder  of  the  stock.  Subscriptions  have  been  received  as  follows: 
L.    N.    Norris,  50  shares;  C.  A.  Willis,  50  shares;  L.  E.  Falch,  25  shares. 

Make  the  entry  in  the  journal.  Make  your  entry  include  details 
of  the  subscription. 

C.  N.  Noble,  St.  Paul,  Minn.,  orders: 

12  Galvanized  Refrigerators  No.  215 
15  "  "  No.  225 

10  "  "  No.  250 

Terms:     2/10,   n/30. 

Fill  the  order.  In  this  set  the  invoice  may  be  made  out  in  the  usual 
way  and  sent  to  the  customer.  It  is  supposed  that  a  duplicate  is  made 
out  at  the  same  time  and  kept  on  file  for  reference.  The  sales  journal 
will  contain  sufficient  information  for  posting  purposes,  without  details 
of  the  sales.  Few  modern  business  systems  copy  the  sales  in  a  sales 
book.     In  most  systems,  the  posting  is  done  either  from  the  duplicate 


MANUFACTURING  337 

invoice,  or  from  the  order  sheet,  a^  in  Set  VII,  or  from  a  sales  journal, 
as  in  this  set.  For  each  sale,  make  out  the  invoice  or  not,  as  the  teacher 
directs,  and  make  the  entry  in  the  sales  journal,  omitting  the  items  sold. 
Use  the  first  amount  column  only. 

Posting  the  Sales  Journal.  In  posting  the  sales  journal,  it  is  of 
great  advantage  to  the  bookkeeper  to  have  the  customer's  account  show 
the  terms  of  each  sale.  When  you  post  to  the  sales  ledger  in  this  set 
put  the  terms  of  sale  in  the  explanatory  column  of  the  customer's 
account. 

January  13.     Pay  the  invoice  of  the  Ball  Hardware   Co.  by  check. 

When  an  invoice  that  was  purchased  at  some  previous  date  is  to 
be  paid,  the  following  steps  should  be  taken: 

1.  From  the  voucher  record,  find  the  number  and  amount  of  the 
voucher. 

2.  Refer  to  your  book  of  vouchers  to  the  proper  number.  Com- 
pare the  amount  with  the  amount  in  the  voucher  record.  If  a  dis- 
count is  allowed,  subtract  it  on  the  voucher.  Do  not  change  the  amount 
in  the  voucher  record. 

3.  Tear  the  voucher  from  the  stub,  and  write  out  the  check. 

4.  Write  the  date  of  payment  in  the  voucher  record. 

5.  Enter  the  payment  on  the  cash  payments.  If  there  is  a  dis- 
count, the  amount  of  the  invoice  before  the  deduction  is  made  is  placed 
in  the  Vouchers  Payable  column,  the  discount  is  put  in  the  Discount 
on  Purchases  column,  and,  the  net  amount,  the  amount  of  the  check, 
is  put  in  the  Bank  Cr.  column. 

Pay  the  invoice  of  the   Mann  Lumber  Co.   by  check. 

Treat  this  the  same   as   the  previous   transaction.      In  this  set,   the 

pupil   will   not   be   told   whether   there   is   a   discount   to   be   deducted   or 

not.     His  records  of  both  purchases  and  sales  must  be  so  kept  that  he 

can  tell  from  his  books  whether  a  discount  should  be  deducted  or  not. 

C.   L.   Yoder,  Peoria,  111.,  orders: 

8  Galvanized  Refrigerators  No.  210 
12  "  "  No.   255 

15  Enameled  "  No.  320 

Terms:     2/10,   n/30. 
Fill  the  order  and  make   the  entry  like  the  transaction    on  the  12th. 

Are  you  posting  daily?  Do  not  forget  to  post  this  last  transaction  so  that  your  ledger  account 
will  show  the  terms  of  sale. 

January  14-  Bought  an  invoice  of  lumber  from  the  Moore  Lum- 
ber  Co.,    Minneapolis,   as   follows: 

12  M  ft.  Oak  Lumber  at  $73.75 
6  M  ft.  Ash  Lumber  at  $40.85 
3  M  ft.  Pine  Lumber  at  $34.60 
Terms:      1/10,   n/30. 


338  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Pay  freight  on  this  shipment    of  lumber  by  voucher  check  in  favor 
of  C.  &  N.   W.  R.  R.  Co.,  $147.60. 

L.  C.  Prey  &  Co.,  Keokuk,  Iowa,  order: 

20  Enameled  Refrigerators  No.  315 

15  "  "  No.  320 

12  "  "  No.  355 

6  Porcelain  "  No.  450 

Terms:     2/10,   n/30. 

J.   A.   Dreher   &   Co.,   Ft.   Wayne,   Ind.,   order: 

8  Galvanized  Refrigerators  No.  260 

12  Enameled  "  No.  320 

15  "  "  No.  355 

Terms:      n/30. 

Pay  cash  for  pencils,  pens,  and  miscellaneous  office  supplies,   $2.25. 
January  15.     B.  E.   Derby,   Columbus,   Ohio,  orders: 
6  Galvanized  Refrigerators  No.  215 
10  "  "  No.  225 

24  "  "  No.  250 

18  Enameled  "  No.  320 

12  "  "  No.  355 

Terms:     One  half  cash;   balance  in  30  days.      Cash  is  received  for 
one-half   of  the  invoice. 

D.  C.  Harvey,  Appleton,  Wis.,  orders: 
12  Galvanized  Refrigerators  No.  220 
15  "  "  No.  250 

Terms:     draft  with  B/L  attached. 

Make  no  entry  for  the  draft  till  it  is  reported  collected. 
The  subscribers  to  the  stock  of  the  corporation,   as  recorded  on  the 
12th,  have   paid   in    the   amount    of   their   subscriptions,    and   have    been 
given  certificates  of  stock. 

Show  the  details  in  the  entry. 

January   16.     Bought   of  the   Janes   Lumber   Co.,    Manistee,    Mich.: 
j6  M  ft.   Hemlock  Lumber  at  $27.50.     Terms:     n/30. 

Pay   cash   for    a    want   advertisement   for   skilled    workmen   for   the 
factory,  $1.55. 

D.    E.    Bolting,    Muskegon,    Mich.,    orders: 
15  Enameled  Refrigerators  No.  320 
8  "  "  No.  355 

5  Porcelain  "  No.  450 

Terms:     2/10,   n/30. 

Bought    machinery    from    the    Case    Machinery    Co.,    Racine,    Wis., 
for   $896.50.      Terms:   n/15. 

Pay    the    freight    on    this    bill    of    machinery    by    voucher    check   in 
favor  of  C.  M.  &  St.  P.  R.  R.  Co.,  $18.75. 


MANUFACTURING  339 

Since  a  machine  is  of  no  value  to  the  business  until  it  is  set  up 
in  the  factory,  it  is  correct  to  charge  the  freight  on  machinery  and  any 
other  necessary  cost  before  the  machine  is  ready  to  operate,  to  the 
asset  account. 

January  17.     C.  F.  Gorrel,  Pittsburg,  Pa.,  orders: 
9  Enameled  Refrigerators  No.  325 
12  "  "  No.  360 

Terms:     draft,  30  days  after  date. 

Make  no  entry  for  the  draft  till  it  is  reported  accepted. 

Pay  the  National  Iron  Co.  for  the  invoice  of  the  7th. 

Refer  to  the  instructions  for  a  similar  transaction  on  January  13. 

Pay  the  A.  R.  Hansen  Co.  for  invoice  of  the  8th. 

Are  you  extending  the  amount  of  each  check  into  the  Bank  column?  Have  you  marked  the 
voucher  paid  in  the  voucher  record? 

The  manager  hands  you  the  pay  roll  for  the  last  two  weeks,  with 
totals  to   be   charged  as  follows: 

Skilled  workmen  and  helpers  $  996 .  50 

Engineer  and  fireman  80.00 

Foremen  130.00 

Unskilled  workmen  40.00 

Shipping  clerk  and  helpers  95.00 

$1341.50 
Make  a  voucher  check  for  the  pay  roll  in  favor  of  yourself  as 
cashier.  In  entering  it  in  the  voucher  record,  distribution  must  be  made 
in  accordance  with  the  elements  of  cost  explained  in  Chapter  XXXV. 
Use  but  one  line  in  the  voucher  record  and  distribute  the  pay  roll 
amounts.  You  should  use  the  distributive  columns  for  Productive 
Labor,   Unproductive   Labor,   Fuel,   Light  and  Power,   and  Shipping. 

The  salaries  of  the  office  force  and  of  the  deliveryman  will  be  paid 
monthly. 

Issue  a  voucher  check  to  yourself  for  the  petty  cash  expenditures 
for  the  week.     Refer   to  a   similar   transaction   on  January    10.     Balance 
the  petty,  cash  book.    Enter  the  amount  received  in  the  petty  cash  book. 
Januanj  19.     J.   E.  Brock,   Cleveland,  Ohio,  orders: 
10  Galvanized  Refrigerators  No.  215 
15  "  "  No.  255 

6  "  "  No.  260 

12  Enameled  "  No.  350 

Terms:    n/30. 

He  has  asked  us  to  ship  this  order  to  D.  Petry,  Canton,  Ohio,  and 
to  pay  the  freight  for  him.  Pay  the  freight  by  voucher  check  to  the 
C.  &  N.  W.  R.  R.  Co.,  $20.75.  Charge  it  to  the  buyer.  You  must  post 
this  item  from  the  voucher  record  twice,  to  the  debit  of  the  customer's 
account  in  the  sales  ledger  and  also  to  the  debit  of  Accounts  Receivable 


340  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

in  the  general  ledger.  In  the  Sundry  Accounts  column  of  the  voucher 
record  write  the  name  of  the  customer  and  put  Accounts  Receivable  in 
parenthesis.    Add  the  freight  on  the  invoice. 

C.  L.   Voss,    Detroit,    Mich.,   orders: 

22  Enameled  Refrigerators  No.  350 

16  "                      "  No.  355 

5  Porcelain  "  No.  455 
3  "                      "  No.  460 

Terms:     n/30. 

D.  E.  Bolting  reports  one  porcelain  refrigerator  No.  450  broken  and 
damaged  in  transit.     Allow  him  credit  for  it  at  the  selling  price. 

January  20.     C.  N.  Noble,  St.  Paul,  Minn.,  orders: 
8  Galvanized  RefrigeratorsNo.  215 

12  "  "  No.  220 

18  "  "  No.  255 

Terms:     2/10,   n/30. 

C.  L.  Yoder,   Peoria,  111.,  orders: 

15  Enameled  Refrigerators  No.  325 
10  "  ''  No.  355 
12           "                      "              No.  360 

6  Porcelain  "  No.  460 
Terms:     2/10,   n/30. 

Pay  the  A.  N.   Miller  Co.  for  invoice  of  the  10th. 

The  bank  reports  the  sight  draft  on  D.  C.  Harvey  collected.  Pay 
the  collection  charges  in  cash,  30^. 

January  21.  Received  the  acceptance  of  our  30-day  draft,  on  C.  F. 
Gorrel,  for  $283.35,  for  invoice  of  January  17. 

Bought  an  invoice  of  galvanized  iron  from  the  Eiring  Iron  Co., 
City,   amounting  to   $897.25.      Terms:      1/30,   n/60. 

D.  C.   Harvey,  Appleton,  Wis.,  orders: 

16  Enameled  Refrigerators  No.  350 
12  "  "  No.  355 

6  Porcelain  "  No.  455 

Terms:     30-da.  draft. 

January  22.  Received  a  check  from  C.  N.  Noble  for  invoice  of 
the    12th. 

Are  you  referring  to  the  ledger  each  time  that  a  check  is  received  to  see  whether  there  is  a 
discount  or  not? 

One  of  the  machines  has  not  been  working  properly.  A  skilled 
workman  in  the  factory  has  repaired  it.  He  has  used  12  hours  of  his  time  at 
50^  an  hour.  Make  an  adjustment  entry  debiting  Repairs  to  Machinery 
and  crediting  Productive  Labor. 

When  the  pay  roll  is  made  out  his  entire  wages  will  be  charged  to 
Productive  Labor.     This  entry  reduces  the  charge  to  that  account. 


MANUFACTURING  341 

Instead  of  using  this  method,  the  pay  roll  might  be  divided  up  and 
the  part  that  was  used  for  repairs  might  be  charged  direct  to  the  Re- 
pairs to  Machinery  account.  There  is  always  danger  that  it  will  be 
overlooked   or  forgotten   at  that   time. 

Pay  cash  for  telegrams,  75^. 

B.  N.  Rarden,   Detroit,   Mich.,  orders: 

4  Galvanized  Refrigerators  No.  225 
8  "  "  No.  255 

12     Enameled  "  No.  320 

10  "  "  No.  360 

Terms :    sight  draft,  less  1  %. 

Do  not  deduct  the  discount  in  the  sales  journal. 
Pay  cash  for  stamps,  $3. 

January  23.  Received  a  check  from  C.  L.  Yoder  for  invoice  of  the 
13th. 

C.  N.   Yahr,    Dubuque,   Iowa,   orders: 

24  Enameled  Refrigerators  No.  350 

12  "  "      .     No.  360 

8     Porcelain  *  No.  450 

5  "  "  No.  460 

Terms:  note  at  30  days,  with  interest  at  6%.  The  note  is  received 
with  the  order. 

J.   E.   Brock,   Cleveland,   Ohio,   orders: 
18  Galvanized  Refrigerators  No.  250 
16  "  "  No.  260 

10  Enameled  "  No.  325 

8  "  •  u  No.  355 

Terms:    draft,  30  days  after  date,  for  $250;  balance,  on  account. 
Make  no  entry  for  the  draft  till  it  is  received  accepted. 
Bought   of   Pritzlaff    Hardware    Co.,    City,    an   invoice   of   locks   and 
hinges  amounting  to  $273.85.     Terms:     2/10,  n/30. 

January  24-     Pay  the  Moore  Lumber  Co.  for  invoice  of  the  14th. 
Received  the  acceptance  of  our  30-da.   draft  on   D.   C.   Harvey  for 
invoice  of  the  21st.     The  acceptance  is  dated  the  date  of  the  invoice. 
D.   G.   Loucks,   South  Bend,   Ind.,   orders: 

6  Galvanized  Refrigerators  No.  210 
8  "  "  No.  220 

15  "  "  No.  225 

12  "  "  No.  250 

Terms:     on  account. 

Draw   a   voucher   check   for   the   expenditures   from   the   petty   cash 
fund  for  the  past  week.     Treat  this  like  similar  transactions. 

Received  a  check  from  L.   C.   Prey    &   Co.  for  invoice  of  the  14th. 


342  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

January  26.  Received  the  acceptance  of  our  30-da.  draft  on  J.  E. 
Brock,  for  $250.     The  acceptance  is  dated  January  23. 

The  bank  reports  the  sight  draft  on  B.  C.  Rarden  collected. 

Do  not  forget  that  the  discount  must  be  computed  and  entered 
now. 

Received  a  check  from  D.  E.  Bolting  for  invoice  of  the  16th. 

C.    L.    Voss,    Detroit,    Mich.,   orders: 

5  Enameled  Refrigerators  No.  320 
8         "  "  No.  325 

15         "  "  No.  350 

24         "  "  No.  355 

Terms:     n/30. 

Pay  cash  for  subscriptions  to  the  following  magazines  for  the  use 
of  the  office  force:  The  System,  $2;  The  Bookkeeper,  $1.50;  Journal  of 
Accountancy,   $3. 

January  27.  Inserted  a  want  ad.  in  the  Free  Press  and  paid  cash 
for  it,  $1.35. 

C.  N.  Yahr  reported  that  one  enameled  refrigerator  No.  360  was 
badly  cracked  in  shipment.  He  has  been  instructed  to  send  it  back. 
Give  him  credit.  Since  he  has  given  his  note  in  full  payment  of  this 
invoice,  the  credit  must  be  to  the  account  of  Notes  Receivable,  instead 
of  to  his  personal  account. 

Pay  telephone  bill  to  Feb.  1  by  voucher  check  in  favor  of  the  Independ- 
ent Telephone  Co.,  $9. 

Pay  cash  for  a  city  directory,  $5. 

January  28.     C.   D.  Caldwell  &  Co.,  Atlanta,   Ga.,  order: 

15  Galvanized  Refrigerators  No.  250 

20         "  "  No.  255 

12  Enameled  "  No.  325 

18         "  "  No.  350 

Terms:     2/10,   n/30. 
F.   A.   Somers,   Louisville,   Ky.,   orders: 

6  Enameled  Refrigerators  No.  355 
8         "  "  No.  360 

15  Porcelain  "  No.  450 

6         "  "  No.  460 

Terms:     n/30. 
Pay  cash  for  Bradstreet's  quarterly  commercial  report,  $6. 

January  29.  Discounted  the  30-da.  acceptance  of  J.  C.  Brock  for 
$250  and  the  30-da.  acceptance  of  D.  C.  Harvey  for  $511.50.  6%  is 
charged  in  both  cases. 

You  must  make  the  entries  so  as  to  show  that  the  face  of  the  ac- 


MANUFACTURING  343 

ceptance  is  credited,  that  Interest  is  debited  for  the  discount,  and  that  the 
bank  is  debited  for  the  proceeds.      A  note  or  acceptance  discounted  should 
be  credited  to  Notes  Receivable  Discounted  to  show  a  contingent  liability. 
N.  D.   Garvey,  Albany,   N.  Y.,  orders: 
12  Enameled  Refrigerators  No.  325 
6         "  "  No.  350 

15         "  "  No.  355 

20         "  "  No.  360 

Terms:     2/10,  n/30. 

January  80.     C.  A.   McKinney,   Harrisburg,  Pa.,  orders: 

12  Enameled  Refrigerators  No.  315 

24         "  "  No.  325 

32         "  "  No.  355 

6  Porcelain  "  No.  450 

Terms:     2/10,   n/30. 

Received  a  check  from  C.  N.  Noble  for  invoice  of  the  20th. 

Received  a  check  from  C.  L.  Yoder  for  invoice  of  the  20th. 

C.  D.  Masters  reports  his  traveling  expenses  for  the  three  weeks  as 
$65.75.  Issue  a  voucher  check  to  him  for  his  expenses  and  for  his 
salary  for  two-thirds  of  a  month  at  $150  per  month. 

Pay  the  Case  Machine  Co.  for  the  invoice  of  machinery  bought  on 
the  16th. 

January  81.     C.   L.   Yoder,   Peoria,   111.,  orders: 

15  Enameled  Refrigerators  No.  320 

12         "  "  No.  350 

8         "  "  No.  355 

4  Porcelain  "  No.  455 

Terms:     2/10,   n/30. 

Issue  a  voucher  check  for  the  petty  cash  expenditures  for  the  week. 
Issue  a  voucher  check  for  the  pay  roll  including  the  following: 


Skilled  workmen  and  helpers 

$1937.25 

Unskilled  workmen  and  helpers 

45.00 

Engineer  and  fireman 

80.00 

Foremen 

130.00 

Shipping  clerk  and  helpers 

115.00 

Deliveryman  and  helper 

125.00 

Manager 

125.00 

Secretary 

150.00 

Office  force 

135.00 

$2842.25 

344  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

CLOSING    WORK 

1.  Close  the  sales  journal  and  post  it. 

2.  Close  the  cash  book  on  journal  paper  and  submit  it  to  your  teacher 
for  correction.  Study  carefully  the  model  cash  book  on  pages  326  and 
327  before  closing  the  cash  book.  Notice  that  there  are  three  steps  in 
the  closing  of  the  cash  book  in  this  set.  First,  the  sum  of  the  first  two 
columns  of  the  Cash  Receipts  must  equal  the  sum  of  the  last  three 
columns,  and  the  accounts  affected  must  be  shown.  Second,  the  sum  of 
the  first  column  of  the  Cash  Payments  must  equal  the  sum  of  the 
last  two  columns,  and  the  accounts  affected  must  be  shown.  Third,  the 
cash  book  must  be  balanced  by  taking  the  difference  between  the  two 
Bank  columns  and  entering  it  as  Balance.  The  balance  must  be  carried 
to  the  debit  side  of  the  cash  book  and  placed  in  the  General  and  Bank 
Dr.   columns  after  the  cash  book  has  been  ruled  up. 

In  the  cash  book  illustrated  on  pages  326  and  327  the  Balance,  May 
1,  was  deducted  first.  In  this  set  there  was  no  balance,  January  1,  and 
this  step  is  unnecessary.  For  February,  the  closing  will  be  the  same  as 
the  model. 

3.  Close  the  journal  and  post  it. 

4.  Find  the  total  of  each  amount  column  of  the  voucher  record  in 
pencil.  The  total  of  the  Vouchers  Payable  column  of  the  voucher  record 
should  equal  the  sum  of  all  the  other  amount  columns.  Rule  a  single 
red  line  and  on  the  second  line  below  rule  double  red  lines.  Place  the 
totals  on  the  double  lines.  Post  the  voucher  record  totals  and  place 
the  pages  of  the  various  accounts  on  the  line  above  the  total  amounts. 
The  total  of  the  Sundry  Accounts  column  is  not  posted,  as  each  entry  in 
it   was   posted   daily. 

5.  Make  a  proof  of  the  sales  ledger. 

6.  Make  a  proof  of  the  voucher  record.  To  do  this,  list  the  unpaid 
vouchers  by  numbers  and  amounts,  and  find  the  sum.  This  sum  should 
equal  the  balance  of  the  Vouchers  Payable  account  in  the  general 
ledger.  It  should  also  correspond  with  the  vouchers  still  attached  to 
the  stub  in  the  book  of  vouchers. 

If  these  three  do  not  agree,  check  the  vouchers  paid  in  the  voucher 
record  with  the  Cash  Payments,  and  with  the  vouchers  paid  in  the 
book  of  vouchers. 

7.  Take  a  trial  balance  of  the  general  ledger. 

Submit  all  of  your  books  and  the  Vouchers  Paid  envelope  to  your 
teacher   for   inspection. 

Set  IX,  January,  will  be  completed  in  Chapter  XXXIX. 


CHAPTER  XXXVIII 
DEPRECIATION 


All  Tangible  Fixed  Assets  depreciate  in  value.  This  is  true  of 
these  assets  no  matter  whether  repairs  and  replacements  are  made  or 
not.  The  use  of  the  asset,  lapse  of  time,  and,  in  the  case  of  ma- 
chinery, patterns,  etc.,  the  possibility  that  the  machine  or  pattern  will 
be    replaced    by    something    better    cause    depreciation. 

Depreciation  of  Buildings  used  for  manufacturing,  of  machinery, 
tools,  and  equipment  is  a  part  of  the  cost  of  manufacturing.  These 
fixed  assets  depreciate  because  they  are  used  in  manufacturing.  The 
depreciation  is  just  as  much  a  manufacturing  cost  as  repairs  to  ma- 
chinery, labor,  or  any  other  cost  element.  A  machine,  for  example,  will 
last  a  certain  number  of  years  and  then  be  of  no  value  for  manu- 
facturing. It  has  been  used  up  year  by  year  in  the  process  of  manu- 
facturing. 

Basis  of  Estimating  Depreciation.  Depreciation  on  a  machine  will 
be  taken  as  an  example  of  the  method  of  estimating  depreciation. 
The  basis  of  depreciation  charges  to  be  made  at  periodical  intervals  it 
the  cost  of  the  machine,  the  probable  life  of  the  machine,  and  the 
residual  or  scrap  value,  if  any.  The  cost  of  the  machine  is  a  definite 
element  that  can  readily  be  ascertained,  but  the  other  two  elements 
are  largely  matters  of  opinion  and  can  be  nothing  but  estimates.  The 
cost  of  the  machine  includes  the  cost  of  the  machine  itself,  the  cost 
of  the  freight  and  drayage  necessary  to  put  the  machine  in  the  factory, 
and   the   cost   of   installing   and   connecting   the   machine. 

Even  if  the  estimating  of  depreciation  is  something  that  cannot  be 
determined  with  exactness,  there  are  few  business  houses  that  do  not 
make  these  estimates  periodically.  The  poorest  possible  method  of 
handling  depreciation  is  that  of  allowing  the  asset  to  wear  out  without 
making  any  provision  for  depreciation.  When  a  machine  is  bought  to 
take  the  place  of  a  machine  that  is  worn  out,  it  must  be  charged  to  the 
cost  of  production  and  not  to  the  asset  account.  This  makes  some 
years  bear  a  very  heavy  burden  while  others  will  bear  only  a  small 
burden. 

Even    if   repairs    and    replacements    are    made    each    year,    provision 

345 


346  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

must  be  made  for  the  complete  wearing  out  of  the  machine  or  other 
asset.  The  only  correct  way  of  treating  depreciation  is  to  set  aside 
periodically  out  of  earnings  a  definite  sum,  so  that  no  particular  period 
will  bear  a  heavy  burden. 

Methods  of  Estimating  Depreciation.  There  are  several  methods  of 
estimating  depreciation  in  common  use.  One  is  to  simply  appraise  or 
estimate  the  value  of  each  asset  each  year.  The  difference  between  the 
former  estimate  and  the  present  one  is  the  depreciation.  This  is  a  dif- 
ficult task  if  there  are  a  large  number  of  assets,  such  as  tools  and 
machines.  It  is  not  very  satisfactory  either  because  it  does  not  con- 
sider the  fact  that  a  machine  or  other  asset  wears  out  faster  as  it  be- 
comes  older   and   that   later   years   will   bear   a   heavier   burden. 

Another  method  is  to  take  the  difference  between  the  cost  of  the 
machine  and  the  residual  or  scrap  value.  This  difference  is  divided  by 
the  number  of  years  the  machine  is  estimated  to  last.  It  is  usually  ex- 
pressed as  a  certain  per  cent  of  the  cost  taken  off  each  year. 

If  the  cost  of  a  machine  was  $1000  and  it  is  worth  $100  at  the  end  of 
10  years,  $900  should  be  divided  by  10  to  give  the  deduction  for  each 
year.  Expressed  as  a  per  cent  of  the  cost  to  be  taken  off  each  year, 
9%  would  be  the  deduction.  This  method  is  a  simple  one  and  a  good 
one  for  short-lived  assets.  But  there  is  one  objection  to  it.  The  same 
amount  is  taken  off  each  year  but  the  repairs  are  more  costly  during 
the  latter  part  of  the  period  than  during  the  first  part.  That  makes 
the  charge  to  manufacturing  larger  during  the  latter  part  of  the  period. 

Another  method  that  equalizes  the  burden  for  a  period  of  years  is  to 
take  off  a  fixed  per  cent  of  the  decreasing  net  value  each  year.  In 
this  way,  using  the  same  illustration,  20.6%  should  be  taken  off  of  the 
decreasing  net  value  yearly.  Taking  off  20.6%,  or  $206,  the  first  year, 
would  leave  $794.  20.6%  of  this  subtracted  would  leave  $630.44.  By 
continuing  this  for  ten  years,  the  approximate  value  left  would  be  $100. 

Methods  of  Entering  Depreciation.  Depreciation  may  be  entered  on 
the  books  by  writing  down  the  asset  or  by  setting  up  a  reserve.  The 
method  of  writing  down  the  asset  has  been  illustrated  in  the  sets  al- 
ready used.  In  the  case  of  office  equipment,  delivery  equipment,  and 
other  similar  assets,  the  asset  is  usually  written  down  by  a  charge  to 
Profit  and  Loss,  or  to  Selling  and  a  credit  to  the  asset  account.  By  this 
method,  the  bookkeeper  must  refer  back  to  the  year  in  which  the  asset  was 
purchased  in  order  to  find  its  cost.  This  is  objectionable  from  an  insurance 
point  of  view.  For  this  reason,  if  the  amount  is  large,  it  is  better  to  use  the 
method  of  setting  up  a  reserve. 

In  the  case  of  buildings,  machinery,  tools,  and  factory  equipment, 
it  is  better  to  set  up  a  reserve  account  for  depreciation  rather  than 
to  write  down  the  asset.  A  separate  reserve  account  should  be  kept  for 
each  asset  account  on  which  depreciation  is  taken,  as,  for  Real  Estate, 


DEPRECIATION  347 

Reserve  for  Depreciation  on  Buildings;  for  Machinery,  Reserve  for  Depreciation 
on  Machinery;  for  Tools  and  Equipment,  Reserve  for  Depreciation  on  Tools 
and  Equipment. 

The  Entry  in  each  case  would  be  a  debit  to  the  Profit  and  Loss 
account  affected,  as, 

Manufacturing 

To  Reserve  for  Depreciation,   Machinery 
In  the  Balance  Sheet,  depreciation  must  be  shown  as  a  deduction 
from  the  asset  against  which  it  was  set  up,  as, 

Machinery  $  5000 

Less    5%    Reserve    for    Depreciation  250 

$  4750 
Sale  of  Assets.  When  a  machine  is  sold  before  it  is  completely 
worn  out,  the  reserve  for  depreciation  that  has  been  set  up  must  be 
taken  into  consideration  in  making  the  entry.  When  a  machine  or  other 
asset  is  sold  its  full  value  must  be  taken  out  of  the  asset  account. 
Whether  the  transaction  will  show  a  profit  or  a  loss  on  the  books  at 
the  time  of  making  the  entry  will  depend  on  whether  the  amount  of  the 
reserve  for  depreciation  set  up  has  been  great  enough  to  offset  the  loss 
in  the  sale  of  the  asset. 

To  illustrate,  a  machine  that  cost  $500  three  years  ago  is  carried  on 
the  books  at  $500  with  a  reserve  for  depreciation  of  $150  set  up.   It  is  sold 
for  $325,  thus  making  a  loss  of  $25.     The  entries  would  be  as  follows: 
Cash  $325 

To  Machinery  $325 

for  the  selling  price  of  the   machine. 

To  transfer  the  reserve  for  depreciation  already  on  the  books  to 
Machinery,   the  entry  would   be: 

Reserve  for  Depreciation,  Machinery  $150 

To  Machinery  $150 

To  account  for  the  loss  of  $25  an  entry  must  be  made  charging  that 
amount  to  Surplus  because  it  represents  too  small  a  charge  to  profits  in 
previous  years.  If  the  sale  is  made  at  some  other  time  than  at  the  end 
of  a  fiscal  period,  the  loss  on  the  sale  must  be  apportioned  between 
former  financial  periods  and  the  present  one.  If  the  books  were  closed 
December  31,  and  at  that  time  a  depreciation  of  $150  had  been  set 
up  for  a  total  of  three  years  on  an  asset  that  cost  $500,  the  carrying 
value  of  the  asset  was  $350.  If,  on  April  1,  the  machine  was  sold  for 
$300,  the  first  thing  necessary  would  be  to  find  the  depreciation  on  the 
asset  for  three  months  and  enter  it  as  follows: 

Manufacturing  $12 .  50 

To    Reserve    for    Depreciation, 
Machinery  $12.50 

The  loss  on  the  sale  that  has  not  been  charged  is  $37.50. 


348  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

The  depreciation  would  be  charged  to  the  Machinery  account,  as 
before,  as  follows: 

Reserve  for   Depreciation,  Machinery     $162.50 

To  Machinery  .  $162.50 

The  loss  of  $37.50  would  be  divided  between  Surplus  and  Manu- 
facturing in  the  proportion  of  three  years  to  three  months,  ff ,  or  ^f , 
should  be  charged  to  Surplus  and  ^,  or  ^-,  to  Manufacturing.  The 
entry  would  be: 

Surplus  $34.62 

Manufacturing  2.88 

To  Machinery  $37.50 

If  a  machine  that  was  carried  on  the  books  at  $350  was  sold  at  the 
end  of  the  fiscal  period  for  $375,  the  entry  to  Surplus  would  be  a  credit 
instead  of  a  debit. 

In  all  these  cases,  the  new  machine  would  be  charged  to  the  Ma- 
chinery account  and  credited  to  Cash  or  to  the  account  of  the  company 
from   which  the  purchase   was  made. 

Exercise  82.  On  January  1,  machinery  was  purchased  for  $2500. 
On  December  31  of  the  same  year,  it  is  decided  to  compute  deprecia- 
tion for  the  year  at  8%.  Make  the  necessary  entry  on  December  31 
and  show  how  the  depreciation  would  be  shown  in  the  balance  sheet. 

Exercise  83.  On  May  1,  a  corporation  purchased  machinery  for 
$4500;  on  June  1,  it  purchased  additional  machinery  for  $1200,  and  on 
August  1,  machinery  for  $500.  Statements  are  made  December  31  of 
the  same  year  and  depreciation  taken  at  the  rate  of  8%  per  annum. 
Find  the  depreciation  charge  on  all  the  machinery  and  make  the  neces- 
sary entry. 

Exercise  84.  A  corporation  purchased  a  motor  truck  for  $1500 
on  March  1.  When  the  books  were  closed  on  December  31  of  the 
same  year,  depreciation  was  taken  at  the  rate  of  15%  per  year.  In 
closing  the  books  December  31  of  the  next  year  15%  of  the  diminished 
value  was  taken.  Find  the  present  value  of  the  delivery  equipment  and 
make  the  entry  for  the  depreciation. 

Exercise  85.  January  1,  a  corporation  purchased  land  and  build- 
ings as  follows:  Land,  $12500;  Buildings,  $22500.  For  three  suc- 
cessive years  the  books  were  closed  December  31  and  a  depreciation  of 
10%  taken  on  the  decreasing  net  value.  On  December  31  of  the  fourth 
year  10%  is  again  computed  on  the  decreasing  net  value.  Make  the 
necessary  entry   December  31   of  the  fourth  year. 

Exercise  86.  On  January  1,  a  corporation  bought  a  machine  for 
$1750.  On  December  31  of  the  same  year  15%  depreciation  was  taken. 
December  31  of  the  next  year  the  same  per  cent  was  taken  off  of  the 
cost.     On  April   1,   of  the  next  year,   the   machine   was  sold  for  $1085. 


DEPRECIATION  349 

Make  the  entries  necessary  to  record  the  depreciation,  the  sale  of  the 
machine,   and   the   profit   or  loss  on  the   transaction. 

Before  the  profit  or  loss  can  be  found,  the  depreciation  charge  for 
the  time  from  the  date  of  the  last  closing,  December  31,  to  April  1 
must   be  found  and  entered. 

Exercise  87.  A  corporation  bought  three  machines,  as  follows: 
February  1,  $1800;  May  1,  $2400;  July  1,  $800.  December  31  of  the 
same  year  a  depreciation  charge  of  12%  per  year  was  made  on  the 
original  cost.  On  March  1,  of  the  next  year,  the  machine  which  cost 
$1800  was  sold  for  $1325.  On  September  1,  the  machine  which  cost 
$800  was  sold  for  $650.  Make  all  the  entries  necessary  to  record  the 
depreciation  on  December  31  and  the  sales  on  March  1  and  September  1. 


CHAPTER  XXXIX 

MANUFACTURING,    SELLING,    AND    PROFIT   AND    LOSS 

STATEMENTS 


Before  making  statements  and  closing  the  ledger  for  the  month  of 
January,  a  study  must  be  made  of  the  method  of  making  the  statements 
in  a  manufacturing  business  and  of  the  new  entries  necessary  to  close 
the  ledger.  This  will  be  done  by  taking  a  trial  balance  and  inventories 
and  from  them  making  statements,  a  balance  sheet,  and  giving  the 
closing  entries  and   the   closing  ledger  accounts. 


Trial  Balance,  Decemb 

er  31,   19— 

Capital  Stock 

$ 

75000. 

00 

Surplus 

6175. 

25 

Land  &  Buildings                            $ 

25000.00 

Machinery 

7500.00 

Tools  &  Equipment 

1025.00 

Delivery  Equipment 

1425.00 

Furniture  &   Fixtures 

375.00 

Patents 

2150.00 

Notes  Receivable 

3896.00 

Accounts  Receivable 

18277.55 

Advances  to  Salesmen 

250.00 

Petty  Cash 

50.00 

First  National   Bank 

26175.50 

Vouchers  Payable 

7192. 

40 

Notes  Payable 

5385. 

75 

Notes  Receivable   Discounted 

1576. 

00 

Material  Purchases 

24834.75 

Freight  In 

387.50 

• 

Direct  Labor 

12173.80 

Fuel,  Light  &  Power 

616.75 

Factory  Supplies 

92.80 

Indirect  Labor 

505.00 

Repairs  to  Machinery 

75.20 

Repairs  to  Buildings 

187.50 

350 


MANUFACTURING,  SELLING,  PROFIT  AND  LOSS  STATEMENTS      351 


Sales. 

$34217.90 

Salesmen's  Salaries 

$  675.00 

Salesmen's  Traveling  Expenses 

615.00 

Discount  on  Sales 

215.25 

Freight  Out 

92.80 

Advertising 

1435.00 

Shipping 

335.00 

Delivery  Expense 

345.00 

Office  Salaries 

750.00 

Miscellaneous  Office  Expense 

104.30 

Stationery  &  Printing 

35.20 

Insurance 

185.00 

Discount  on  Purchases 

• 

347.25 

Collection  &  Exchange 

16.80 

Interest 

92.85 

$129894.55  $129894.55 


Inventories,   December  31,   19- 


Raw  Material 

$8172.50 

Finished  Goods 

5417.20 

Unpaid  Labor 

452.25 

Direct. 

$417.25 

Indirect 

35.00 

Fuel  on  Hand 

84.30 

Factory  Supplies 

16.40 

Unexpired  Advertising 

625.00 

Unexpired  Insurance 

115.00 

On  Raw  Material 

85.00 

On  Finished  Goods 

20.00 

On  Delivery  Equipment 

10.00 

Accrued  Interest  on  Notes  Payable 

16.70 

"                "           "       "      Receivable 

21.40 

The  following  depreciations  and  reserves  are  i 

allowed: 

On  Buildings 

1% 

On  Machinery 

3% 

On  Tools  &  Equipment 

4% 

On  Delivery  Equipment 

2% 

On  Furniture  &  Fixtures 

2% 

Reserve  for  Bad  Debts 

y% 

The  student  should   make  a   careful  review  of   Chapter  XXXV    on 
Manufacturing  Costs  before  studying  the  following  statements. 


352 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


Manufacturing,    Selling,   and   Profit   &    Loss  Statements 
for  the  month  ending  December  31,  19 — 


MANUFACTURING   SECTION 


616.75 
84.30 


Prime  Cost: 

Material  Purchases 
Less  Inventory 
Freight  In 
Direct  Labor,  Paid 

Unpaid 
Manufacturing  Expense: 
Fuel,  Light  &  Power 
Less  Coal  on  Hand 
Factory  Supplies 
Less  Supplies  on  Hand.. 
Indirect  Labor,  Paid 

■      Unpaid 
Insurance, 
Less  Unexpired 
Repairs  to  Machinery 

"       ".  Buildings 
Patents  Used 

Depreciation  on  Buildings,  1% 
*  ■    Machinery,  3% 

u  *  Tools  &  Equip.,  4% 


$24834.75 

8172.50  $16662.25 

387.50 
12173.80 
417.25 


12591.05 


92.80 
16.40 


505.00 
35.00 


120.00 
85.00 


532.45 

76.40 

540.00 

35.00 
75.20 
187.50 
143.33 
250.00 
225.00 
41.00 

$31746.68 


Manufacturing  Cost  down      $31 746 .  68 


$31746.68 


SELLING    SECTION 

Sales 


Manufacturing  Cost  down  $31746.68 
Less  Inventory,  Fin.  Goods     5417 .  20  $26329 .  48 

Salesmen 's  Salaries  675 .  00 

"        Traveling  Exp.  615.00 

Delivery  Expense  345 .  00 

Shipping  335 .  00 

Freight  Out  92 .  80 

Advertising  1435.00 

Less  Unexpired  625 .  00 


Insurance 

Less  Unexpired 

Depreciation  on  Delivery  Equip. 

Gross  Selling  Profit  down 


65.00 
30.00 


810.00 

35.00 
28.50 

4736.87 
$34002.65 


$34736.45 

Returns  and  Allow.       518.55 

Net  Sales  34217.90 

Less  Discount  215.25 


Net  Ret.  from  Sales 


$34002.65 


$34002.65 


MANUFACTURING,  SELLING,  PROFIT  AND  LOSS  STATEMENTS       353 

PROFIT    AND    LOSS    SECTION 

Office  Salaries 

Miscellaneous  Office  Expense 
Stationery  &  Printing 
Collection  &  Exchange 
Interest  Paid 

Accrued,  Notes  Pay. 

Accrued,  Notes  Rec. 

Depreciation,  Furniture  &  Fixtures 
Reserve  for  Bad  Debts 
Net  Profit 


$750.00 

Gross  Selling  Profit  down 

$4736.87 

104.30 

Discount  on  Purchases 

347.25 

35.20 

16.80 

$  92.85 

16.70 

$109.55 

21.40 

88.15 
7.50 

ures 

91.39 

3990.78 

$5084.12 

$5084.12 

The    following   journal    entries    would    then  be   made,  under  date  of 
December  31,  19 — ,  and  posted  to  the  ledger  accounts  affected: 


Inventory,  Raw  Material                 $  8172. 

50 

To  Material  Purchases 

$  8172.50 

Direct  Labor                                              417. 

25 

Indirect  Labor                                               35. 

00 

ToAccruedLiabilitylnventories 

452.25 

Manufacturing                                       31746. 

68 

To    Material  Purchases 

16662.25 

Freight  In 

387.50 

Direct  Labor 

12591.05 

Fuel,  Light  &  Power 

532.45 

Factory  Supplies 

76.40 

Indirect  Labor 

540.00 

Insurance 

35.00 

Repairs  to  Machinery 

75.20 

"    Buildings 

187.50 

Patents 

143.33 

Reserve  for  Dep.,  Buildings 

250.00 

Reserve  for  Dep.,  Machinery 

225.00 

Reserve  for  Dep.,  Tools  and  Equip 

i. 

41.00 

354 


METROPOLITAN  SYSTEM  OP  BOOKKEEPING 


Selling 

$31746.68 

To    Manufacturing 

$31746.68 

Sales 

34217.90 

To    Selling 

34217.90 

Inventory,  Finished  Goods 

5417.20 

To    Selling 

5417.20 

Selling 

3151.55 

To    Salesmen's  Salaries 

675.00 

"           Traveling  Exp. 

615.00 

Discount  on  Sales 

215.25 

Delivery  Expense 

345.00 

Shipping 

335.00 

Freight  Out 

92.80 

Advertising 

810.00 

Insurance 

35.00 

Delivery  Equipment 

28.50 

Selling 

4736. 

,87 

To  Profit  &  Loss 

4736.87 

Interest 

16. 

70 

To  Accrued  Liability  Inventories 

16.70 

Accrued  Asset  Inventories 

21, 

40 

To  Interest 

21.40 

Discount  on  Purchases 

347. 

25 

To  Profit  &  Loss 

347.25 

Profit  &  Loss 

1093. 

34 

To    Office  Salaries 

750.00 

Miscellaneous  Office  Exp. 

104.30 

Stationery  &  Printing 

35.20 

Collection  &  Exchange 

16.80 

Interest 

88.15 

Furniture  &  Fixtures 

7.50 

Reserve  for  Bad  Debts 

91.39 

Profit  &  Loss 

3990. 

78 

To  Surplus 

3990.78 

MANUFACTURING,  SELLING,  PROFIT  AND  LOSS  STATEMENTS       355 


In  posting  to  the  Manufacturing,  Selling,  and  Profit  &  Loss  accounts 
the  details  of  each  entry  must  be  given,  as  follows: 


Dec. 


31 


Dec. 


31 


Dec. 


31 


Manufacturing 


Material  Pur.  J 

Freight  In 

Direct  Labor 

Fuel,  Light  &  Power 

Factory  Supplies 

Indirect  Labor 

Insurance 

Repairs  to  Mach. 
"         "  Building 

Patents 

Dep.  on  Buildings 
"         "    Machinery 
"         *    Tools  &  Equip. 


Manufacturing  J 

Salesmen's  Salaries 

"  Trav.  Exp. 

Delivery  Expense 
Shipping 
Freight  Out 
Advertising 
Insurance 

Dep.  on  Delivery  Equip. 
Profit  &  Loss 


Office  Salaries 
Misc.  Office  Expense 
Stationery  &  Printing 
Collection  &  Exchange 
Interest 

Dep.  on  Furn.  &  Fix. 
Reserve  for  Bad  Debts 
Surplus 


8 

16662 

387 

12591 

532 

76 

540 

35 

75 

*  187 

143 

250 

225 

25 
50 
05 
45 
40 

20 
50 
33 

Dec. 

31 

41 

— 

31746 

68 

Selling 


31746 


31746 


68 


68 


Selling 


9 

31746 

68 

Dec. 

31 

675 

— 

# 

615 

— 

345 

— 

335 

— 

92 

80 

810 

— 

35 

— 

28 

50 

4736 

87 

39419 

85 

Sales  J 

Inv.  Fin.  Goods 


Profit  &  Loss 


34002 
5417 


39419 


65 
20 


85 


9 

750 
104 
35 
16 
88 
7 
91 

30 
20 
80 
15 
50 
39 

Dec. 

31 

— 

3990 

78 

5084 

12 

Selling 
Disc,  on  Pur. 


9 

4736 
347 

87 
25 

5084 

12 

356 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


After  closing  the  ledger  and  balancing  all  asset  accounts  remaining  on 
the  books  and  all  asset  elements  in  nominal  accounts,  a  balance  sheet 
should  be  taken,  as  follows: 

Balance  Sheet,  December  31,  19 — . 


ASSETS 


•LIABILITIES 


Real  Estate 

$25000.00 

Capital  Stock 

75000 

00 

Less  Reserve  for  Dep. 

250.00 

24750 

00 

Surplus 
(   Notes  Payable 

10166 
5385 

03 

75 

Machinery- 

7500.00 

Vouchers  Payable 

7192 

40 

Less  Reserve  for  Dep. 

225.00 

7275 

00 

Notes  Receivable  Disc. 
Labor  Unpaid 

1576 
452 

00 

25 

Tools  &  Equipment 

1025.00 

Interest  Accrued 

16 

70 

Less  Reserve  for  Dep. 

41.00 

984 

00 

Reserve  for  Bad  Debts 

91 

39 

Delivery  Equipment 

1425.00 

Less  Depreciation 

28.50 

1396 

50 

Furniture  &  Fixtures 

375.00 

Less  Depreciation 

7.50 

367 

50 

Patents 

2150.00 

Less  i3^  used 

143.33 

2006 
8172 

67 
50 

Inventory,  Materials 

8        Finished  Goods 

5417 

20 

Notes  Receivable 

3896 

00 

On  hand 

2320.00 

Discounted 

1576.00 

18277 

55 

Accounts  Receivable 

Advances  to  Salesmen 

250 

00 

Fuel,  Light  &  Power 

84 

30 

Factory  Supplies 

16 

40 

Advertising 

625 

00 

Insurance 

115 

00 

Interest 

21 

40 

Petty  Cash 

50 

00 

First  National  Bank 

26175 

50 

99880 

52 

99880 

52 

~ 

MANUFACTURING,  SELLING,  PROFIT  AND  LOSS  STATEMENTS       357 

SET  IX,  JANUARY 
closing  work  (Concluded) 

8.  Make   Manufacturing,  Selling,  and   Profit  and    Loss  statements, 
using  the  following  inventories: 

Raw  Material  '  $  993 .  50 

Finished  Goods  1480 .  50 

Coal  on  Hand  102.25 

Insurance  Unexpired : 

Manufacturing,  $108.12;  Selling,  $22.58  130  .70 

Advertising  Unexpired  970.00 

Interest  Accrued  on  Notes  Receivable  3.67 

Compute  depreciations  and  reserves  as  follows: 

Buildings  1  % 

Machinery  1  % 

Tools  and  Equipment  2% 

Furniture  &  Fixtures  1  % 

Delivery  Equipment  2% 

Reserve  for  Bad  Debts  1  %  of  Accounts  Receivable 

Before  using  the  inventories  as  a  result  of  the  taking  off  of  these 
depreciations,    submit    them    to    your    teacher    for    correction. 

9.  Make  the  necessary  entries  to  close  the  books,  and  post  them. 

a)  To  enter  the  inventories,  and  to  transfer  the  accounts  in  the 
Manufacturing  section  to  the  Manufacturing  account. 

b)  To  transfer  the  balance  of  the  Manufacturing  account  to  the 
Selling  account. 

c)  To  transfer  the    accounts   in   the   Selling  section  to  the  Sell- 
ing account. 

d)  To    transfer    the     balance     of    the    Selling    account    to    the 
Profit  and  Loss  account. 

e)  To  enter  the  inventories,  and  to  transfer  the  accounts  in  the 
Profit  and   Loss  section  to  the  Profit  and  Loss  account. 

f)  To  transfer  the  balance  of  the   Profit  and   Loss  account  to 
Surplus. 

10.  Rule   all   nominal   and   mixed   accounts.     Bring   down   all   asset 
or  liability  elements. 

11.  Balance   all  accounts  that   show   an  asset   or  a  liability  unless 
there  is  simply  one  item  in  the  account.     Rule  all  accounts  that  balance. 

12.  Make   a   balance   sheet   of   the  ledger  after   closing. 

13.  Copy    your     Manufacturing,     Selling,     and     Profit     and    Loss 
statements,  and  your  Balance  Sheet  in  your  blank  books. 

14.  Submit  all  of  your  books  to  your  teacher  for  correction. 


358  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

REVIEW  QUESTIONS 

1.  What  is  a  corporation? 

2.  Give  the  steps  necessary  to  organize  a  corporation. 

3.  Distinguish  between  preferred  stock  and  common  stock. 

4.  a)  What  is  treasury  stock?     b)  How  does  it  differ  from  unsubscribed  stock? 

5.  What  auxiliary  books  are  necessary  to  record  the  acts  of  a  corporation  as 
such? 

6.  Describe  the  stock  ledger  and  explain  the  entries  in  it. 

7.  Explain  each  of  the  following  accounts  by  telling  for  what  each  is  used  and 
what  each  shows  in  the  statements:  Subscriptions,  Capital  Stock,  and  Unsubscribed 
Stock. 

8.  Explain  the  meaning  of  prime  cost,  manufacturing  cost,  factory  burden,  and 
overhead  expense. 

9.  In  which  statement  should  each  of  the  following  accounts  and  inventories 
be  placed,  and  why:  Discount  on  Sales,  Discount  on  Purchases,  Patents,  Deprecia- 
tion on  Machinery,  Depreciation  on  Furniture  &  Fixtures,  Interest,  Inventory  of 
Finished  Goods,  Inventory  of  Factory  Supplies? 

10.  a)  What  is  Good  Will?  b)  Under  what  conditions  should  the  account  be 
opened  up?     How  is  it  treated  in  the  statements? 

11.  What  entries  should  be  made  on  partnership  books  to  show  the  sale  of  a 
business  to  a  corporation  and  the  receipt  of  stock  for  it? 

12.  What  entries  should  be  made  on  corporation  books  to  show  the  purchase  of 
a  partnership  business  and  the  issue  of  stock  in  payment? 

13.  a)  What  is  a  voucher?  b)  What  is  the  meaning  of  the  word  as  used  in  con- 
nection with  a  voucher  system  of  accounts? 

14.  a)  What  are  the  advantages  of  the  voucher  system  of  accounts?  b)  Are 
there  any  disadvantages? 

15.  Describe  three  kinds  of  vouchers  or  voucher  checks. 

16.  What  is  meant  by  the  expression  "distribution  of  voucher?" 

17.  Describe  the  voucher  record,  and  tell  how  the  entries  are  made  in  it. 

18.  a)  How  is  the  voucher  record  posted?    b)  How  is  it  proved? 

19.  What  entries  are  made  when  a  voucher  is  paid? 

20.  Give  two  ways  of  computing  depreciation. 

21.  Give  two  methods  of  entering  depreciation  on  the  books. 

22.  Give  the  closing  entry  to  transfer  the  manufacturing  costs  to  the  proper 
accounts. 

23.  Give  the  closing  entry  to  transfer  the  sales  and  the  selling  expenses  to  the 
proper  accounts. 

24.  Give  the  closing  entry  to  transfer  the  general  items  to  the  proper  account. 

25.  Give  the  entry  to  close  the  Profit  &  Loss  account. 


CHAPTER  XL 

MANUFACTURING 

SET  IX 
Transactions  for  February  1-28 

The  Same  Books  of  entry  will  be  used  for  this  month  as  for  Jan- 
uary. Vouchers  will  be  made  out  in  the  same  way  and  the  entries 
will  be  made  like  those  of  January  with  the  exception  of  a  few  new 
features   which   will   be   explained   as   they   are   taken   up. 

Before  making  any  entries  for  February,  it  will  be  necessary  to 
transfer  to  the  respective  accounts  the  inventories  that  were  opened  up 
in  special  accounts  for  the  purpose  of  closing  the  accounts.  This  is  done 
by  a  reversing  entry  for  each  account  effected,  as  follows: 

Material  Purchases  $993.50 

To  Inventory  Raw  Material  $993.50 

Interest  $3.67 

To  Accrued  Asset  Inventories  $3.67 

In  making  entries  in  the  sales  journal  for  this  month,  use  the  first 
column  for  the  amount  of  the  invoice,  the  second,  for  the  amount  of  the 
refrigerator  sales  for  any  invoice,  and  the  third,  for  the  amount  of 
kitchen  cabinet  sales  for  any  invoice.  At  the  end  of  the  month,  the 
total  of  the  Amount  column  should  be  debited  to  Accounts  Receivable, 
the  total  of  the  Refrigerator  Sales  column  should  be  credited  to  Re- 
frigerator Sales,  and  the  total  of  the  Kitchen  Cabinet  Sales  column 
should   be   credited   to   Kitchen   Cabinet   Sales. 

February  2.  The  company  has  decided  to  manufacture  a  kitchen 
cabinet  for  the  trade,  in  addition  to  the  line  of  refrigerators  already 
listed.  To  do  this,  the  company  has  bought  the  Patent  right  for  the 
manufacture  of  kitchen  cabinets  from  C.  D.  Janis  for  $1500.  The 
patent  has  five  years  to  run.  Pay  him  for  it  by  voucher  check.  Charge 
it  to  Patents. 

The  Patent  Account.  This  account  is  kept  for  the  cost  of  all 
patents.  It  is  also  charged  for  any  money  paid  out  for  defending  the 
patent  right  or  for  the  cost  of  prosecuting  for  infringement  of  the 
patent.       A    patent    gives    the    patentee    the   right    to    manufacture    the 

359 


360  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

article  upon  which  the  patent  is  granted,  exclusively  for  a  period  of  seven- 
teen years.  Each  time  that  a  statement  is  made  a  proportionate  part  of 
the  cost  of  the  patent  has  been  used  in  manufacturing.  In  this  case, 
the  patent  has  five  years  to  run.  Each  year  one-fifth  of  the  cost  must 
be  charged  off  to  Manufacturing,  or  one-sixtieth  for  one  month. 
In  the  same  way,  any  cost  of  defending  the  patent  or  of  prosecuting 
for  infringement  must  be  apportioned  over  the  time  that  the  patent 
has  to  run. 

Bought  an  invoice  of  aluminum  from  the  Everwear  Aluminum  Co., 
New   York,    amounting   to   $475.     Terms:    2/10,    n/30. 
J.  A.  Dreher  &  Co.,  Ft.   Wayne,  Ind.  order: 
16  Galvanized  Refrigerators  No.  255 
8  Enameled  "  No.  325 

Terms:    2/10,  n/30. 

Bought  an  invoice  of  lumber  from  the  Schroeder  Lumber  Co., 
Oshkosh,   Wis.,  as  follows: 

10  M  ft.   Maple  Lumber  at    $52.75 
8  M  ft.  Oak  Lumber       at      71.40 
5  M  ft.  Ash  Lumber       at      40.25 
Terms:    2/10,  n/30. 

Pay  the  Hilton   Mfg.   Co.  for  the  invoice  of  machinery  due  today. 
The  C.   M.   &  St.   P.   R.   R.   Co.  presents  a  freight  bill  for  $185.75 
for  the  two  invoices  of  material  purchased  today.     Pay  it. 
D.  E.  Bolting,   Muskegon,   Mich.,  orders: 

15  Enameled  Refrigerators  No.  320 

18  "  "  No.  350 

24  "  "  No.  360 

Terms:    draft  30  days  after  date. 

Make  no  entry  for  the  draft  till  it  is  reported  accepted. 
J.  E.  Brock,   Cleveland,  Ohio,  orders: 
8  Enameled  Refrigerators  No.  325 

12  "  "  No.  350 

20  Porcelain  "  No.  450 

Terms:    2/10,  n/30. 

Pay  the  Pritzlaff  Hardware  Co.  for  the  invoice  of  hardware  due 
today.  % 

February  3.  Bought  an  invoice  of  porcelain  of  the  Lawrence  Pottery 
Co.,  E.  Liverpool,  Ohio,  amounting  to  $575.80.     Terms:  account  15  days. 

Pay  freight  on  this  purchase  of  porcelain  by  check  in  favor  of  the 
C.   &   N.   W.   R.   R.    Co.,   $57.25. 

Bought  an  invoice  of  glass  from  the  Zimmers  Glass  Co.,   Wheeling, 


MANUFACTURING  361 

W.    Va.,    $346.80.     Terms:     cash,    less    3%.      Enter   the   full   amount   in 
the  voucher  record. 

C.  N.  Noble,  St.  Paul,  orders: 

16  Enameled  Refrigerators  No.  320 

18  "  *  No.  350 

5  Porcelain  "  No.  455 
Terms:    2/10,  n/30. 

J.  C.   Ochs,  Ft.   Wayne,  Ind.,  orders: 

6  Galvanized  Refrigerators  No.  215 
12  "  "  No.  250 

Terms:    draft  with  B/L  attached. 

Bought  an  invoice  of  machinery  from  the  J.  I.  Case  Machine  Co., 
Racine,    Wis.,    amounting    to    $1575.     Terms:     cash. 

Pay  freight  on  this  invoice  of  machinery  by  check  in  favor  of  the 
C.   M.  &  St.   P.   R.   R.   Co.,  $8.95. 

February  4-  Pay  the  voucher  of  January  5  in  favor  of  the  Western 
Coal  Co. 

Bought  an  invoice  of  zinc  and  galvanized  iron  from  the  National 
Iron  Co.,  Chicago,  111.,  as  follows:  zinc,  $297.85;  galvanized  iron, 
$437.50.     Terms:    n/30;    f.  o.  b.  Milwaukee. 

Pay  cash  for  stamps,  $5;  for  telegrams,  75^;  and  for  office  sup- 
plies, $3.75. 

Bought  of  the  Underwood  Typewriter  Co.,  City,  one  Underwood 
typewriter  for  $100.     Terms:    cash. 

J.  A.  Dreher  &  Co.  report  one  enameled  refrigerator,  No.  325, 
damaged    in    transit.     Give    them    credit    for    it. 

B.    N.    Rarden,    Detroit,    Mich.,   orders: 
9  Galvanized  Refrigerators  No.  250 
12  "  "  No.  260 

5  Enameled  "  No.  320 

Terms:    sight  draft  for  $200;    balance,  on  account. 

F.  A.  Somers,   Louisville,   Ky.,  orders: 
8  Enameled  Refrigerators  No.  350 
12  Porcelain  "  No.  450 

5  "  "  No.  460 

Terms:    2/10,  n/30. 

February  5.  Bought  an  invoice  of  hardware  from  the  Pritzlaff 
Hardware  Co.,  City,  amounting  to  $347.80.  Of  this,  $16.50  is  for  re- 
pairs to  the  building,  and  the  balance  is  for  raw  material.  Terms: 
2/10,  n/30. 

Advertised  in  the  Daily  News  for  finishers  for  the  factory.  Pay 
for  three  insertions  in  cash,   $2.25. 

Bought  a  safe  for  the  office  from  the  Hibbard  Safe  Co.,  Cincinnati, 
Ohio,  for  $475.     Terms:    n/30. 


362  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Received  D.  E.  Bolting's  acceptance  of  our  30-day  draft  for  the 
sale  to  him  on  the  2d. 

Pay  Voigt  &  Co.  for  taking  photographs  and  making  cuts  to  be 
used  in  advertising  matter,   by  check,   $27.50. 

February  6.  Pay  the  voucher  of  January  7  in  favor  of  the  Patton 
Paint  Co. 

Received  a  check  of  C.  D.  Caldwell  &  Co.  for  invoice  of  January  28. 
One   of   the   workmen,    J.    C.    Belding,    has   bought   a   galvanized   re- 
frigerator No.  250.     Give  him  a  discount  of  10%.      Enter  it  in  the  sales 
journal    for    the    net    amount.     The    cash    is    received.     Enter   it    in    the 
cash  book.     Check  in  both  places. 

G.  A.   Bower,  La  Crosse,  Wis.,  orders: 
15  Enameled  Refrigerators  No.  320 
24  "  «  No.  325 

12  "  "  No.  350 

Terms:    cash,  less  3%. 
The  cash  is  received  with  the  order. 
B.  E.   Derby,   Columbus,   Ohio,  orders: 

8  Galvanized  Refrigerators  No.  260 
12  Enameled  "  No.  320 

Terms:    note  at  30  days,  with  interest  at  6%. 
The  note  is  not  received  with  the  order. 

February  7.  Bought  of  the  City  Supply  Co.,  City,  factory  sup- 
plies  amounting  to   $68.75.     Terms:    n/30. 

The  bank  reports  the  sight  draft  on  B.  N.  Rarden  left  for  col- 
lection  on   the  4th  collected.     Pay  the   charges   of  -ru%   in   cash. 

Issue  a  voucher  check  to  yourself  for  the  petty  expenses  for  the 
week.     Balance  the  petty  cash  book. 

N.   D.   Garvey  paid  the  invoice  of  January  29. 

February  9.     C.    A.     McKinney    paid    the    invoice    of    January    30. 

Bought  an  invoice  of  varnish,  stains,  and  shellac  of  the  Patton  Paint 
Co.,   City,  amounting  to  $237.80.     Terms:    1/10,  n/30. 

The  bank  reports  the  sight  draft  with  B/L  attached,  on  J.  C.  Ochs, 
left  at  the  bank  on  February  3,  collected.  Pay  the  collection  charges, 
25j£,  in  cash. 

Pay  cash  for  envelopes  and  bill  heads,  $5.75. 

D.    C.    Harvey,   Appleton,    Wis.,   orders: 

18  Enameled  Refrigerators  No.  350 

12  "  "  No.  360 

6  Porcelain  "  No.  450 

Terms:    2/10,  n/30. 

February  10.  Received  a  check  from  C.  L.  Yoder,  for  invoice  of 
January  31. 


MANUFACTURING  363 

C.  D.  Masters,  traveling  salesman,  reports  expenses  amounting  to 
$47.85.     Give   him   a   voucher   check   for   that   amount. 

Received  a  bill  from  the  Kort  Printing  Co.  for  printing  circulars 
to    be   sent   to   the   trade,    $7.50.     Pay   it   by   voucher   check. 

Pay  Chas.  Pollock  cash,  $2.50,  for  addressing  envelopes  for  advertis- 
ing circulars. 

Pay  cash,   $6,   for  mailing  these  circulars. 

Received  B.  E.  Derby's  note  for  30  days,  dated  February  6,  with 
interest  at  6%,  for  invoice  of  February  6. 

As  the  stock  of  finished  goods  is  increasing  and  the  warehouse  is 
overcrowded,  the  board  of  directors  has  voted  to  buy  the  four  lots 
adjoining  the  factory  site  and  the  building  on  it  of  the  Ticonic  Realty 
Co.,  for  $15750.  The  lots  are  valued  at  $4400  and  the  building  at 
$11350.  The  terms  agreed  upon  are  cash,  $7000,  and  a  mortgage  payable 
one  year  after  date  with  interest  at  6%  for  the  balance.  Make  a 
voucher  for  the  purchase  price.  Write  the  check  for  $7000  and  enter 
it  in  the  cash  book.    After  the  voucher  number,  write,  In  part  payment. 

In  the  journal  make  an  entry  debiting  Vouchers  Payable  and 
crediting  Mortgage  Payable  for  the  amount  of  the  mortgage.  The 
explanation  should  show  to  whom  the  mortgage  is  payable  and  the 
time  and  rate  of  interest.  In  the  "When  Paid"  column  of  the  voucher 
record,  Cash  and  Mortgage  should  be  written,  with  a  J  before  "  Mort- 
gage." 

February  12.  D.  C.  Harvey  reports  one  porcelain  refrigerator 
No.  450  damaged  in  transit.     Credit  him  for  it. 

The  time  of  one  workman  has  been  employed  in  repairing  ma- 
chinery.     Make  a  journal  entry  charging  12  hours  time  at  45^   an  hour. 

C.   N.   Yahr,   Dubuque,   Iowa,   orders: 

14  Galvanized  Refrigerators  No.  220 
9  "  "  No.  255 
4  Enameled              "  No.  320 

Terms:    n/30. 

C.  F.   Gorrell,   Pittsburg,   Pa.,  orders: 

6   Galvanized  Refrigerators  No.   260 

15  Enameled  "  No.  315 
6           "                      "  No.  360 

Terms:    1/10,  n/30. 

J.  A.  Dreher  &  Co.  paid  the  invoice  of  February  2  and  the  invoice 
of  January  14.      Make  an  entry  for  each  invoice  paid. 

Pay  the  Schroeder   Lumber   Co.   for  invoice  of  the  2d. 

Pay  the  Everwear  Aluminum   Co.   for  invoice  of  the  2d. 

February  13.  G.  A.  Bower  reports  that  two  enameled  refrigerators 
No.  320  were  unsatisfactorv.     He  has  been  allowed  a  rebate  of  one-half 


364  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

the   value   of   them.     Since   he   has   paid   cash   for   his   purchase,   issue  a 
voucher    to    him    for    the    amount. 

What  account  was  credited  when  the  sale  was  made?  This  transaction  must  be  charged  to  the 
same  account. 

Discount  at  the  National  Exchange  Bank,  C.  N.  Yahr's  note,  dated 
January  23,  payable  30  days  after  date,  with  interest  at  6%.  The 
bank  charges  6  %.  Do  not  forget  that  there  is  a  credit  on  this  note  be- 
cause of  an  allowance. 

Also  discount  at  the  bank  D.  E.  Bolting's  acceptance  of  our  30-day 
draft,   dated   February  2.     The  bank  charges  6%. 

Received  a  check  of  C.  N.  Noble  for  invoice  of  the  3d. 

Received  a  check  of  F.   A.   Somers  for  invoice  of  the  4th. 

February  14>  Received  of  J.  E.  Brock  a  check  for  invoice  of 
February  2,  less  discount.  As  the  check  was  not  received  within  the 
10  days,  we  have  refused  to  allow  him  the  discount,  and  have  notified 
him  to  that  effect.     Give  him  credit  for  the  amount  he  has  sent. 

Pay   Pritzlaff    Hardware    Co.   for   the   invoice   of   February   5. 

Issue  a  voucher  check  in  your  favor  for  the  petty  cash  expenditures 
for  the  week. 

The  manager  hands  you  the  pay  roll  for  the  factory  for  two  weeks 
as  follows: 

Skilled  workmen  and  helpers  $1236.40 

Engineer  and  fireman  85 .  00 

Unskilled  workmen  35.00 

Foremen  150.00 

Shipping  clerk  and  helpers  105.00 

Issue  a  voucher  check  in  your  favor  as  cashier  for  the  pay  roll. 

February  16.     Pay  invoice  of  January  16  favor  the  Janes  Lumber  Co. 

Received  a  check  from  B.  E.  Derby  to  balance  his  account  for  January. 

The  manager  reports  the  first  lot  of  kitchen  cabinets  ready  for 
shipment.  They  will  be  known  as  No.  150  and  will  sell  for  $11.35. 
Add  this  item  to  your  price  list. 

C.  L.  Yoder,  Peoria,  111.,  orders: 

8  Galvanized  Refrigerators  No.  260 

15  Enameled  "  No.  325 

8  Porcelain  "  No.  450 

6  "  "  No.  460 

Terms:    2/10,  n/30. 

D.  G.   Loucks,  South  Bend,  Ind.,  orders: 

5  Galvanized  Refrigerators  No.  210 

12  "                      "                No.  215 

8  "                      "                 No.  225 

15  "                      "                 No.  250 

Terms:  note  at  30  days. 


MANUFACTURING  365 

Make  no  entry  for  the  note  until  it  is  reported  received. 
C.  F.  Gorrel's  acceptance,  which  was  left  at  the  bank  for  collection, 
is   reported    collected.     Pay   the   collection    charges   in    cash,    30^. 

February  17.  As  the  company  is  in  need  of  money  for  maturing 
bills,  the  board  of  directors  has  arranged  with  the  National  Exchange 
Bank  to  discount  our  note  for  $3000,  payable  60  days  after  date,  at  6% 
discount. 

Also  discount  at  the  bank  B.  E.  Derby's  note  of  February  6,  with 
interest   at   6%.     The   bank   charges   6%. 

C.  L.  Voss,  Detroit,  Mich.,  sends  a  check  for  invoice  of  January 
19  and  orders: 

8  Galvanized  Refrigerators  No.  255 
12  Enameled  "  No.  315 

20  "  "  No.  325 

5  Porcelain  "  No.  460 
15  Kitchen  Cabinets  No.   150 

Terms:    2/10,  n/30. 

In  all  sales  of  refrigerators  and  kitchen  cabinets,  the  amount  of 
the  invoice  must  be  entered  in  the  first  column,  the  sum  of  the  re- 
frigerator sales  in  the  second  column,  and  the  sum  of  the  kitchen 
cabinet  sales  in  the  third   column. 

L.   C.  Prey  &  Co.,   Keokuk,  Iowa,  order: 

6  Galvanized  Refrigerators  No.  220 
15  "  "  No.  255 

8  Enameled  "  No.  315 

12  Kitchen  Cabinets  No.   150 

Terms:    note  at  30  days  for  $250:    balance,  on  account. 
February  18.     Bought  of  the  Steiner  Lumber  Co.,  Oshkosh,  Wis.: 
15  M  ft.  Oak  Lumber        at  $71.50 
8  M  ft.  Ash  Lumber        at    40.15 

5  M  ft.  Pine  Lumber       at   35.45 

6  M  ft.  Maple  Lumber    at    51.25 
Terms:    draft  at  30  days. 

The  draft  accompanied  the  invoice  and  has  been  accepted. 

Enter  the  purchase  in  the  voucher  record  in  the  usual  way.  Mark 
the  date  of  payment  in  the  "When  Paid"  column  and  put  a  J  before 
it  to  show  that  it  was  not  a  cash  payment.  Make  a  journal  entry  for 
the  accepted  draft.  Do  not  forget  that  although  no  purchase  ledger  is 
kept,  the  name  of'  the  company  must  be  given  in  the  explanation  column 
of  the  journal.  Since  this  voucher  is  paid  so  far  as  our  records  are  con- 
cerned, it  should  be  torn  from  the  stub  and  Paid  by  30-day  acceptance 
should  be  written  on  the  face  of  the  voucher.  It  should  not  be  sent  to  the 
Steiner  Lumber  Co.  as  companies  do  not  receipt  for  vouchers  except  for 
cash  payments. 


366  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Received  of  J.  E.  Brock  a  check  for  the  invoice  and  charge  of  Jan- 
uary 19  and  the  balance  of  the  invoice  of  February  2. 

Pay   the   Lawrence   Pottery   Co.   for  invoice   of   February   3. 
February  19.    D.  C.  Harvey,  Appleton,  Wis.,  sends  a  check  for  invoice 
of  February  9,  and  orders: 

8  Enameled  Refrigerators  No.  350 
12  *  "  No.  360 

15  Kitchen  Cabinets  No.   150- 

Terms:    2/10,  n/30. 

Pay  the  Patton  Paint  Co.  for  invoice  of  February  9. 
Pay  cash  for  cleaning  offices  $5,  and  for  telegrams,  $1.25. 
F.  A.  Somers,   Louisville,   Ky.,  orders: 
10  Enameled  Refrigerators  No.  315 
15  "  No.  355 

6  Porcelain  "  No.  450 

20  Kitchen  Cabinets  No.   150 

Terms:    2/10,  n/30. 

February  20.     C.    L.    Yoder   reports    one    porcelain   refrigerator    No. 
450  in  a  damaged  condition.     Give  him  credit  for  it. 
Pay  Eiring  Iron   Co.  for  invoice  of  January  21. 
Received  of  D.  G.  Loucks  his  note  at  30  days,  for  invoice  of  February  16. 
Pay   cash   for   repairs   to    motor   truck,    $6.50. 
C.  N.  Yahr,  Dubuque,  Iowa,  orders: 

5  Galvanized  Refrigerators  No.  205 

10  "  "  No.  220 

5  Enameled  "  No.  315 

12  "  "  No.  320 

Terms:    2/10,  n/30. 

J.  A.  Dreher  &  Co.,  Ft.  Wayne,  Ind.,  order: 
18  Enameled  Refrigerators  No.  350 
15  "  "  No.  360 

5  Porcelain  "  No.  455 

6  "  "  No.  460 
15  Kitchen  Cabinets  No.   150 

Terms:    2/10,  n/30. 
B.  N.  Rarden,  Detroit,   Mich.,  orders: 
6  Enameled  Refrigerators  No.  325 
15  "  "  No.  355 

12  "  "  No.  360 

12  Kitchen  Cabinets  No.  150 

Terms:    2/10,  n/30. 

February  21.  Received  a  check  of  C.  F.  Gorrel  for  70  cents  on  the 
dollar  of  his  account.  As  he  is  bankrupt  it  is  accepted  in  full  payment 
of  his  account. 


MANUFACTURING  367 

The  bank  reports  the  note  of  C.  N.  Yahr  and  the  acceptance  of 
D.  C.  Harvey  paid. 

When  the  note  and  acceptance  were  discounted,  the  company  in- 
dorsed them  to  the  bank.  By  so  doing  the  company  incurred  a  second- 
ary liability  which  was  shown  by  crediting  Notes  Receivable  Discounted. 
When  they  were  paid,  the  secondary  liability  ceased.  It  is  then  neces- 
sary to  take  the  amount  out  of  Notes  Receivable  Discounted  and  put  it 
to  the  credit  of  Notes  Receivable.  Make  journal  entries  debiting  Notes 
Receivable  Discounted  and  crediting  Notes  Receivable.  Do  not  forget 
to  explain  the  entries. 

Received  of  L.  C.  Prey  &  Co.  their  note  for  $250,  dated  February  17, 
payable  30  days  after  date. 

B.  E.   Derby,   Columbus,  Ohio,  orders: 

15  Galvanized  Refrigerators  No.  260 

8  Enameled  "  No.  315 

12  "  "  No.  350 

24  Kitchen  Cabinets  No.   150 
Terms:    30-day  draft. 

N.  D.  Garvey,   Albany,   N.  Y.,  orders: 
6  Enameled  Refrigerators  No.  320 
8  "  "  No.  325 

12  «  "  No.  355 

18  Kitchen  Cabinets  No.   150 

Terms:    2/10,  n/30. 
Issue  a  voucher  check  in  favor   of  yourself  for  the   petty  cash   ex- 
penditures for  the  week.     Balance  the  petty  cash  book. 

February  28.  Discount  at  National  Exchange  Bank  D.  G.  Loucks' 
note,  dated  February  16.     The  bank  charges  6%. 

Bought  of  Western  Supply  Co.  for  the  motor  truck: 

1  No.  36  Motor  Top  $175.00 

2  No.  85  Solid  Tires  66.50 

3  gal.  Lubricating  Oil  1 .  35 
50  gal.  Gasoline                                                                  6.00 

Terms:    cash. 

Bought  an  invoice  of  galvanized  iron  and  zinc  from  the  National 
Iron  Co.,   Chicago,  111.,  amounting  to  $318.95.     Terms:   n/30. 

Pay  the  freight  on  this  invoice  by  voucher  check  to  the  C.  M.  &  St. 
P.  R.   R.   Co.,   $25.60. 

C.  L.   Yoder  pays  his  invoice  of  February   16  and  orders: 

25  Kitchen  Cabinets  No.  150 
Terms:    2/10,  n/30. 

February  2J+.  The.  factory  manager  reports  that  two  wood-working 
machines,  bought  on  January  2,  for  $1500,  are  not  doing  satisfactory 
work.     The  board  of   directors  has   authorized  their  sale  for  $1200,  cash, 


368  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

and  two  new  ones  have  been  purchased  from  the  Matthews  Machine  Co. 
for  $1850.  The  cash  is  received  for  the  old  machines  and  the  new  ones 
are  bought  on  the  terms,  net  10  days. 

The  cash  received  must  first  be  entered  and  credited  to  the  Ma- 
chinery account.  The  question  of  depreciation  must  then  be  con- 
sidered. 1  %  of  the  cost  was  set  up  as  a  reserve  at  the  end  of  January. 
This  has  been  credited  to  Reserve  for  Depreciation  on  Machinery.  In 
addition,  the  depreciation  on  the  machines  for  24  days  of  this  month 
must  be  computed.  Find  the  depreciation  for  one  month  at  1  %  on 
the  cost  and  take  four-fifths  of  it. 

Make  a  journal  entry  crediting  Reserve  for  Depreciation  on  Ma- 
chinery and  debiting  the  Manufacturing  account  for  the  depreciation 
for  this  part  of  February.  Then  make  an  entry  debiting  Reserve  for 
Depreciation  on  Machinery  for  the  one  and  four-fifths  months  and  credit- 
ing Machinery.  The  loss  on  these  machines,  $273,  will  be  charged  to 
the  January  and  February  business  in  the  proportion  of  5  to  4.  Charge 
five-ninths  of  the  loss  to  the  January  business  and  four-ninths  to  the 
February  business. 

Make  a  journal  entry  debiting  Surplus  for  the  loss  on  the  January 
business  and  debiting  Manufacturing  for  the  loss  on  the  February  busi- 
ness and  crediting  Machinery  for  the  sum. 

Then  make  the  usual  entry  for  the  new  machines  purchased. 
The    bank  reports    J.    E.    Brock's    acceptance    of   January    23    paid. 
Make  the  proper  entry  to  show   that  you  no  longer  have  any  liability 
for  its  payment.     Received    the    30-day    acceptance  of  B.   E.    Derby  for 
the  sale   on  the  21st. 

C.  L.  Voss,  Detroit,  Mich.,  pays  his  invoices  of  January  26  and 
February  17,   and   orders: 

8  Enameled  Refrigerators  No.  350 

12  Porcelain  "  No.  450 

6  "  "  No.  460 

16  Kitchen  Cabinets  No.   150 

Terms:    2/10,  n/30. 

C.  A.   McKinney,   Harrisburg,  Pa.,  orders: 
25  Galvanized  Refrigerators  No.  250 
20  Enameled  "  No.  320 

10  "  "  No.  350 

15  Kitchen  Cabinets  No.  150 

Terms:    2/10,  n/30. 

Bought  of  the  Minneapolis  Lumber  Co.: 
7   M  ft.  White  Pine  Lumber  at  $52.75 
4  M  ft.  Maple  Lumber  at     58.95 

6  M  ft.  Oak  Lumber  at     73.85 

Terms:    n/30. 


MANUFACTURING  369 

February  26.     Received  a  check  from  F.  A.  Somers,  Louisville,  Ky., 
for  invoice  of  January  28.     He  also  orders  the  following: 
14  Galvanized  Refrigerators  No.  250 
12  Enameled  "  No.  315 

18  Kitchen  Cabinets  No.   150 

Terms:    2/10,  n/30. 

Pay  cash   for   cleaning   the   offices,   $3.60,   and  for  telegrams,   $1.45. 
N.  D.  Garvey  returned  six  enameled  refrigerators  No.  320  as  unsuited 
to  his  trade.     Allow  him  credit  for  them. 

Pay  cash  to  D.  G.  Crane  for  repairs  to  the  buildings,  $15.75. 
The  Kewanee  Co.  presents  a  bill    for    $375  for  installing  smoke  con- 
sumers in  our  plant.     Pay  it  by  voucher  check  and  charge  it  to   Ma- 
chinery. 

February  27.  L.  C.  Prey  &  Co.,  Keokuk,  Iowa,  pay  the  balance  of 
the  invoice  of  February  17,  and  order: 

6  Galvanized  Refrigerators  No.  225 

8  "  "  No.  250 

12  Enameled  "  No.  325 

16  Kitchen  Cabinets  No.   150 

Terms:    2/10,  n/30. 

D.  G.  Loucks,  South  Bend,  Ind.,  orders: 

6  Enameled  Refrigerators  No.  315 

8  "  "  No.  350 

12  "  "  No.  360 

10  Kitchen  Cabinets  No.'  150 

Terms:    2/10,  n/30. 

C.  D.  Masters  reports  his  traveling  expenses  to  date,  $52.40.  Is- 
sue a  voucher  check  to  him  for  his  expenses  and  for  his  salary  for  one 
month. 

February  28.  Issue  a  voucher  check  for  the  petty  cash  expenditures 
for  the  week.     Balance  the  petty  cash  book. 

Issue  a  voucher  check  in  favor  of  yourself  for  the  following  pay  roll: 
Skilled  workmen  and  helpers  $2046  .  50 

Unskilled  workmen  and  helpers  55 .  00 

Engineer  and  fireman  85.00 

Foreman  145.00 

Shipping  clerk  and  helpers  115.00 

Deliveryman  and  helper  125.00 

Manager  125.00 

Secretary  150.00 

Office  force  135.00 

CLOSING    WORK 

1.  Close  the  sales  journal  and  post  it.  You  must  show  the  post- 
ing to  both  Refrigerator  Sales  and  Kitchen  Cabinet  Sales. 


370  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

2.  Close  the  cash  book.  You  must  first  deduct  the  balance  of 
cash,  February  1,  from  the  total  of  the  General  and  Bank  columns  before 
closing  the  cash  book  as  in  January.  This  is  necessary  in  order  to  find 
the  cash  received  during  February  and  deposited  in  the  bank.  It  is 
this  difference  between  the  total  of  the  Bank  column  and  the  balance, 
February  1,  that  is  posted  to  the  debit  of  the  Bank  account.  Post  all 
the  totals  that  should  be  posted. 

3.  Close   the   journal   and   post   it. 

4.  Prove  the  sum  of  the  distribution  columns  with  the  sum  of  the 
Vouchers  Payable  column  of  the  voucher  record.  Close  the  voucher 
record  and  post  it. 

5.  Make  a  proof  of  the  sales  ledger. 

6.  Make  a  proof  of  the  voucher  record. 

7.  Take  a  trial  balance  of  the  general  ledger. 

Submit  all  of  your  books  and  the  Vouchers  Paid  envelope  to  your 
teacher  for  correction. 

8.  Make  Manufacturing,  Selling,  and  Profit  and  Loss  statements, 
using  the  following  inventories: 

Raw  Material  $1035.80 

Finished  Goods  2817.20 

Factory  Supplies  23.25 

Insurance  Unexpired  119.06 

Advertising  Unexpired  217.50 

Interest  Accrued  on  Notes  Receivable  11.48 

Interest  Accrued  on  Mortgages  Payable  24.79 

Gas  Bill  Owed  37.45 

Unpaid  Wages  (Productive  Labor)  47  .  50 

Patents   written   off   for  ^   of  a  year 

Depreciation  charges  as  follows: 

Buildings,  1%  on  $14120.75,  \%  on  $11350 

Machinery,  1%  on  $6749.20,  none  on  the 

last  purchase 

Tools  and  Equipment  2% 

Furniture  and  Fixtures  1  % 

Delivery  Equipment  2% 

Reserve  for  Bad  Debts  2%  of  Accounts  Receivable 

9.  Make  the  necessary  entries  to  close  the  books.  Refer  to  the 
outline  of  the  closing  entries  at  the  close  of  January  before  making  the 
entries. 

10.  Balance  all  accounts  that  show  an  asset  or  a  liability  unless 
there   is   simply   one   item   in    an   account.     Rule   all   nominal   accounts. 

11.  Make   a   balance   sheet   from   the  ledger  after   closing. 

12.  Copy  your  Manufacturing,  Selling,  and  Profit  and  Loss 
statements,  and  your   Balance   Sheet  in   your   blank   books. 


MANUFACTURING 


371 


13.     Submit  all  of  your  books  to  your  teacher  for  inspection. 
Set  IX  will  be  completed  in  Chapter  XLI. 

Exercise  88.  From  the  following  trial  balance  and  inventories 
make  Manufacturing,  Selling,  and  Profit  and  Loss  statements  for  the 
month  ending  January  31,    19 — . 


Trial  Balance,  January  31,  19- 

Capital  Stock 

Unsubscribed  Stock 

Goodwill 

Land  &  Buildings 

Machinery,  Tools  &  Equipment 

Horse  &  Wagon 

Furniture  &  Fixtures 

Patents 

Notes  Receivable 

Accounts  Receivable 

Petty  Cash 

Second  National  Bank 

Material 

Freight  In 

Direct  Labor 

Repairs  to  Plant 

Fuel,  Light  &  Power 

Factory  Supplies 

Indirect  Labor 

Advertising 

Salesmen's  Salaries 

"  Traveling  Expenses 

Delivery  Expense 
Freight  Out 
Sales 

Returns  and  Allowances  on  Sales 
Miscellaneous  Office  Expense 
Office  Salaries 
Interest 
Taxes 
Insurance 
Notes  Payable 
Accounts  Payable 
Notes  Receivable  Discounted 


$50000 

.00 

$10000.00 

5000.00 

17500.00 

6250.00 

575.00 

285.00 

1755.00 

3896.75 

15451.60 

75.00 

8736.45 

9642.80 

212.40 

6300.20 

93.75 

375.00 

112.50 

312.75 

327.50 

450.00 

385.00 

125.50 

28.50 

18816. 

85 

236.75 

56.75 

375.00 

18.90 

318.50 

295.75 

7500. 

00 

10375 

50 

2500 

00 

$89192.35  $89192.35 


$1575 

60 

18 

95 

2315 

25 

215 

75 

10 

.50 

52 

.50 

9 

.75 

12 

50 

45 

25 

1%  of  14000 

.00 

372  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Inventories,  January  31,   19 — 

Raw  Material  • 

Factory  Supplies 

Finished  Goods 

Patents,  -g1^  used;  ff  unused 

Direct  Labor  Accrued 

Indirect  Labor  Accrued 

Advertising  Unexpired 

Interest  on  Notes  Receivable 

"         "         "   Payable 
Insurance  Unexpired 
Depreciation  on  Buildings 

"  "  Machinery,  Tools,  &  Equipment  2% 

"  Horse  &  Wagon  2  % 

"  "  Furniture  &  Fixtures  1  % 

Reserve  for  Bad  Debts — on  Accounts  Receivable  2% 

Charge  three-fourths  of  the  delivery  expense  to  Selling  and  one-fourth 
to  Manufacturing.  Charge  three-fifths  of  the  insurance  and  of  the  taxes 
to  Manufacturing  and  two -fifths  to  Selling. 

Exercise  89.  Make  the  necessary  entries  to  close  the  books  in 
Exercise  88. 

Keep  your  entries  until  you  have  worked  Exercise  90  in  the  next 
chapter. 

REVIEW  QUESTIONS 

1.  a)  What  is  the  object  of  the  petty  cash  book?  b)  How  are  the  entries  made 
from  it  weekly? 

2.  To  what  account  should  freight  on  machinery  bought  be  charged?     Why? 

3.  How  should  real  estate  bought  and  paid  for  in  cash  and  by  a  mortgage  be  entered? 

4.  What  entry  should  be  made  for  another's  note,  with  interest,  discounted? 

5.  What  entry  should  be  made  for  the  corporation's  note  discounted? 

6.  a)  What  is  the  object  of  the  Notes  Receivable  Discounted  account?  b)  What 
entry  should  be  made  when  a  note  that  has  been  discounted  is  paid  by  the  maker  at  the 
bank? 

7.  What  entries  should  be  made  when  a  machine  that  has  depreciated  in  value  is 
sold  and  a  new  one  purchased? 

8.  In  what  statement  should  each  of  the  following  accounts  and  inventories  be 
placed,  and  why:  Patents,  Reserve  for  Bad  Debts,  Interest  accrued  on  Mortgages  Pay- 
able, an  unpaid  gas  bill? 

9.  What  entry  is  made  when  the  business  buys  a  patent  to  be  used  in  manufacturing 
its  product? 

10.     What  entry  is  made  at  the  end  of  the  fiscal  period  for  the  proportionate  part  of 
the  patent  used? 


CHAPTER  XLI 
DISTRIBUTION  OF  PROFITS 


When  the  books  of  individual  proprietors  or  of  partnerships  are 
closed,  the  balance  of  the  Profit  and  Loss  account  is  closed  into  the 
personal  accounts  of  the  proprietors  and  the  balance  of  each  personal 
account  is  closed  into  the  capital  accounts  unless  the  balance  is  with- 
drawn. Each  partner  has  a  right  to  draw  out  his  profits  as  soon  as 
they  are  determined,  or,  if  there  is  a  loss,  must  suffer  a  diminution  of 
his  capital. 

In  a  corporation,  it  is  necessary  to  keep  the  profits  or  losses  sep- 
arate from  the  original  capital  stock.  The  chief  reason  for  this  is  the 
fact  that  the  stockholders  have  no  right  to  the  profits  of  the  corpora- 
tion until  the  board  of  directors  vote  a  part  or  all  of  the  profits  as 
dividends.  Then,  each  stockholder  has  a  right  which  he  can  enforce 
against  the  corporation. 

When  the  books  are  closed,  the  balance  of  the  Profit  and  Loss  ac- 
count is  transferred  to  the  Surplus  account,  if  a  profit,  by  the  following 
entry: 

Profit  &  Loss 
To  Surplus 

If  a  loss,   the  transfer  is  to  the  Deficiency  account,   as  follows: 
Deficiency 

To  Profit  &  Loss 

By  some,  an  Undivided  Profits  account  is  opened  up  to  which  the 
net  profits  are  transferred.  The  balance  of  this  account  is  transferred 
to  Surplus. 

Powers  of  the  Board  of  Directors.  The  board  of  directors  is  given 
wide  discretionary  powers  in  the  declaration  of  dividends.  It  may  set 
aside  a  part  or  all  of  the  profits  for  extensions,  for  unusual  losses  that 
may  arise,  to  make  up  deficiencies,  or  for  any  other  legitimate  purpose. 
But  so  long  as  the  directors  do  not  misuse  or  misappropriate  the  profits 
of  the  business,  the  stockholders  have  no  remedy. 

Dividends.  After  statements  have  been  made  to  show  the  net 
profits  of  the  corporation,  the  board  of  directors  meets  and  examines  the 
statements,  and  determines  whether  a  dividend  is  to  be  declared  or  not. 

373 


374  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

If  the  board  of  directors  declares  a  dividend,  it  will  be  recorded  in  the 
Minute  Book.  The  record  will  show  the  dividend  declared,  the  date  on 
which  it  is  payable,  and  the  date  on  which  the  transfer  books  are  to  be 
closed.  The  dividend  is  usually  declared  as  a  certain  per  cent  of  the 
par  value  of  the  stock  outstanding,  as,  a  2%  dividend  or  a  dividend  of 
$2  per  share  on  a  par  value  of  $100  a  share.  Dividends  may  be  de- 
clared at  any  time  that  the  net  profits  have  been  determined,  but  are 
usually    declared    annually,    semi-annually,    or    quarterly. 

Entries  for  Declaration  of  Dividends.     When  the  board  of  directors 
declares  a  dividend,   the  bookkeeper  makes  an  entry  like  the  following: 
Surplus 

To  Dividend  No.   10 

5%    dividend,    per    minutes    of    the    board    of     di- 
rectors,   payable    to    stockholders    of    record,    January 
20,   per  minute  book,   page  25. 
Each    dividend   is    given   a   certain   number    by    which   it   is   known 
in  the  entries. 

Closing  the  Transfer  Books.  When  the  board  of  directors  declares 
a  dividend,  it  sets  a  certain  date  for  closing  the  transfer  books.  That 
means  that  during  that  time  no  transfers  of  stock  can  be  made  on  the 
books  but  that  the  dividends  will  be  paid  to  the  stockholders  as  shown 
on  the  books  at  that  time.  The  transfer  books  refer  to  the  Stock 
Transfer  Book  and  the  Stock  Ledger. 

Payment  of  Dividends.  When  the  dividends  are  payable,  a  dividend 
check  is  issued  to  each  stockholder  for  the  amount  to  which  he  is  en- 
titled. One  entry  is  usually  made  on  the  Cash  Payments  for  all  the 
dividend  checks  as  follows: 

Voucher  No.  405  per  dividend  book  $2000 

But  one  voucher  is  usually  issued  for  all  the  dividend  checks  and 
charged   to   Dividend   No.    10  in   the   Sundry   Accounts   column. 

The  amount  each  stockholder  is  to  receive  is  shown  in  the  dividend 
book  like  the  illustration  on  page  302. 

Stock  Dividend.  The  dividends  already  explained  have  been  cash 
dividends.  Sometimes  there  have  been  profits  sufficient  to  declare  a 
dividend  but  to  pay  a  cash  dividend  would  impair  the  working  capital 
of  the  business.  Or,  the  cash  may  be  needed  for  other  purposes.  Then, 
a  stock  dividend  may  be  declared.  To  do  this,  the  corporation  must 
have  treasury  stock  or  unsubscribed  stock  on  hand,  or  must  increase 
its  capital  stock  by  an  amendment  to  the  charter. 

The  entry  for  the  declaration  of  the  dividend  would  be 
Surplus 

To  Stock  Dividend  No.  2 


DISTRIBUTION  OF  PROFITS  375 

The   entry   for   the  issue   of   the   stock  in   payment   of  the   dividend 
would   be  the  following  if   unsubscribed  stock   was   used: 
Stock  Dividend  No.  2 

To  Unsubscribed  Stock 

If  treasury  stock  was  used,  it  would  be: 
Stock  Dividend  No.  2 
To  Treasury  Stock 

Responsibility  of  Directors.  The  directors  are  held  to  a  strong 
legal  responsibility  in  the  declaration  of  dividends.  A  dividend  cannot 
be  declared  and  paid  out  of  capital,  but  only  out  of  net  profits  either 
of  the  current  year  or  of  accumulated  profits  of  other  years  that  have 
not  been  distributed  as  dividends  or  appropriated  for  other  purposes. 
If  the  directors  impair  the  capital  by  declaring  dividends,  they  are  per- 
sonally responsible  for  the  amount. 

Many  corporations  prefer  to  pay  a  certain  rate  of  dividend  each 
year  instead  of  paying  a  high  rate  one  year  and  a  low  one  the  next. 
They  can  do  this  by  accumulating  a  surplus  in  the  most  prosperous 
years. 

Reserves.  Whenever  any  part  of  the  surplus  is  set  aside  and  re- 
served so  that  it  cannot  be  declared  as  dividends,  it  is  called  a  reserve. 
This  is  done  by  a  vote  of  the  board  of  directors  usually  before  a  dividend 
is  declared,  but  it  may  be  done  at  any  time  that  there  is  a  surplus. 
The  reserve  account  is  given  a  name  that  indicates  the  nature  of  the 
appropriation.  The  reserve  may  be  for  something  new,  as,  new  build- 
ings, new  land,  new  machinery,  etc.  The  entry  would  be: 
Surplus 

To  Reserve  for  New  Buildings 
or, 

Surplus 

To  Reserve  for  New  Machinery 

If  the  reserve  is  for  the  purpose  of  providing  for  unusual  losses, 
for  accidents,  or  for  emergencies,  the  account  would  be  Reserve  for 
Fire  Loss,   Reserve  for  Renewals,   Reserve  for  Accidents,  etc. 

The  reserve  may  be  for  the  purpose  of  setting  aside  from  time  to 
time  out  of  profits  amounts  sufficient  to  meet  an  obligation  maturing 
at  some  particular  time.  Of  such  a  nature  are  Sinking  Fund  Reserves  to 
take  care  of  bonds  at  maturity.     These  will  be  explained  in  Chapter  XLII. 

Reserves  Belonging  to  Profit  and  Loss.  The  reserves  here  considered 
are  reserves  that  are  a  part  of  the  distribution  of  profits.  They  must 
not  be  confused  with  reserves  that  must  be  set  aside  before  net  profits 
are  found.  Reserves  of  this  nature  may  be  a  part  of  the  manufacturing, 
selling,  or  general  sections.  They  may  be  reserves  for  depreciation  on 
buildings,  machinery,  etc.,  reserve  for  bad  debts,  etc.  They  are  losses 
and  must  be  deducted  before  net  profits  are  found. 


376  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Exercise  90.  The  board  of  directors  voted  to  set  aside  10%  of 
the  net  profits,  as  shown  by  the  statements  of  Exercise  88,  as  a  reserve 
for   accidents,   and   declared   a   stock   dividend   of   2%. 

Make  the  necessary  entries  for  the  reserve,  for  the  declaration  of  the 
dividend,   and  for  the   payment   of   the   dividend  in   stock. 

Exercise  91.  The  A  Mfg.  Co.  is  incorporated  for  $50000,  with  all 
the  stock  outstanding.  For  the  six  months  ending  December  31,  the 
net  profits  were  $9375.45.  The  board  of  directors  met  and  voted  the 
following: 

1.  To  set  aside  out  of  profits  $2000  for  improvements 

2.  To  reserve  $1000  for  accidents 

3.  To  declare  a  dividend  of  6% 

Make  the  necessary  entries  to  do  this  and  to  pay  the  dividend. 

Exercise  92.  The  Home  Grocery  Co.  is  incorporated  for  $100000. 
$75000  is  fully  paid  up  stock,  the  rest  is  held  for  future  development. 
The  net  profits  for  the  six  months  ending  June  30  were  $8850.75.  The 
board  of  directors  voted  to  set  aside  $5000  for  new  buildings.  They 
also  voted  a  stock  dividend  of  3%.  Make  the  necessary  entries  to  do 
this   and  to   pay  the  stock   dividend. 

Exercise  93.  The  Fish  Mfg.  Co.  is  incorporated  for  $100000. 
$50000  is  fully  paid  up  7%  preferred  stock.  The  balance  is  common 
stock,  $40000  of  which  is  fully  paid  up,  the  other  $10000  being  held  for 
future  development.  For  the  year  ending  December  31,  the  net  profits 
were  $9125.  The  board  of  directors  voted  to  set  aside  $3000  for  new 
machinery,  to  pay  the  dividend  on  the  preferred  stock,  and  to  pay  as 
large  a  whole  per  cent  of  dividend  as  can  be  paid  on  the  common  stock. 

Find  the  per  cent  to  be  paid  on  the  common  stock  and  make  the 
necessary  entries  to  record  the  action  of  the  board  of  directors  and  the 
payment  of  the  dividends. 

SET  IX,  FEBRUARY  (Concluded) 

The  board  of  directors  at  its  meeting,  March  4,  voted  to  set  aside 
out  of  surplus  $500  for  a  reserve  for  accidents.  It  also  declared  a 
dividend  of  1%  on  the  capital  stock  outstanding.  These  acts  are  re- 
corded in  the  minute  book  on  page  10.  The  dividend  is  payable 
March  15. 

Make  the  necessary  entries  to  record  the  acts  of  the  board  of 
directors.     The    entry    should    be    dated    March    4. 

On  March  15,  .dividend  checks  would  be  written  and  sent  to  the 
stockholders. 

Make  out  a  dividend  list  showing  the  amount  each  stockholder 
should  receive.  Make  but  one  entry  in  the  voucher  record  and  in  the 
cash   book  for  all  the  dividend  checks  issued. 


CHAPTER  XLII 
BONDS  AND  FUNDS 


A  Bond  is,  in  effect,  a  promissory  note  issued  under  seal  by  a  corpora- 
tion or  by  a  governmental  unit  like  a  nation,  state,  county,  or  city. 

A  bond  is  usually  issued  for  a  much  longer  time  than  a  note  and  con- 
tains a  formal  statement  concerning  the  issue  of  the  bonds  and  the  security, 
and  usually  names  a   trustee    to   hold   the  security  for  the  bondholders. 

As  to  form  and  method  of  paying  interest,  bonds  are  coupon  and 
registered. 

Coupon  Bonds  are  payable  to  the  order  of  a  person  or  to 
bearer,  and  are  transferred  by  indorsement  or  delivery.  They  have 
attached  to  them  coupons  for  each  interest  installment  as  it  falls  due. 
These  coupons  must  be  presented  and  surrendered  when  the  interest  is 
paid. 

Registered  Bonds  are  payable  to  a  specified  person  whose  name  is 
registered  in  the  books  of  the  corporation  or  governmental  unit.  They 
must  be  transferred  on  the  books  to  the  name  of  the  indorsee  in  order 
to  make  the  transfer  valid.  Interest  is  paid  in  the  same  manner  as 
interest  on  a  note,  to  the  holder  whose  name  is  registered  on  the  books. 

As  to  Security,  bonds  are  usually  named  to  indicate  the  kind  of 
security  back  of  the  bonds,  as,  first  mortgage  bonds,  collateral  trust  bonds, 
income  bonds,  etc. 

The  Object  of  issuing  bonds  is  to  secure  money  for  some  corporate 
purpose  without  giving  to  the  lender  a  voting  interest  in  the  business 
and  without  paying  as  high  a  rate  of  interest  as  the  rate  of  dividend 
on  preferred  stock.  Since  bonds  are  a  direct  obligation  of  the  corpora- 
tion, it  is  easier  to  secure  additional  capital  in  this  way  if  the  corpora- 
tion has  a  good  standing. 

Bonds  May  Be  Authorized  by  the  stockholders  or  by  the  board  of 
directors.     After    they    are    authorized,    they    are    usually    advertised    for 
sale  and  subscriptions  taken  for  them.     When  the  bonds  are  ready  for 
delivery  the  following  entry  is  made  for  the  authorized  issue: 
Bonds  in  Treasury 
To  Bonds 

377 


378  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

When  any  of  the  bonds  are  sold  at  par,  the  entry  is: 
Cash 

To  Bonds  in  Treasury 
If  the   bonds   are   issued  for   property   bought,   such   as,   real   estate, 
an   entry   would   first   be   made   debiting   the   property  and   crediting   the 
seller.     Then,     the    seller    would     be    debited    and    Bonds    in    Treasury 
credited. 

Discount  or  Premium  on  Bonds.     If  bonds  are  sold  at  a  discount, 
the  entry  becomes 
Cash 
Discount  on  Bonds 

To  Bonds  in  Treasury 
If  sold  at  a  premium,  it  becomes 
Cash 

To  Premium  on  Bonds 
Bonds  in  Treasury 
Bonds  in  Treasury  represents  bonds  authorized  but  not  issued.  It 
represents  the  right  of  the  corporation  to  sell  bonds  and  receive  cash 
or  other  assets  for  them.  It  is  best  shown  on  the  balance  sheet  as  a 
deduction  from  the  liability  of  bonds,  so  as  to  show  the  actual  out- 
standing bonds. 

Discount  on  Bonds  in  Closing.  The  reason  bonds  are  sold  at  a 
discount  is  because  the  rate  of  interest  is  not  large  enough  to  give  the 
investor  sufficient  return  for  his  money  if  they  are  sold  at  par.  The 
discount  is  really  interest  paid  in  advance  because  if  the  bonds  are  not 
sold  at  a  discount,  the  interest  rate  would  be  higher.  Discount  On 
Bonds  should  be  carried  on  the  books  as  a  deferred  asset  and  a  pro- 
portionate amount  deducted  each  year  depending  on  the  life  of  the  bond. 
If  $100000  worth  of  bonds,  authorized  to  run  20  years  and  bear 
interest  at  5%,  were  sold  at  90  the  following  entry  would  be  made: 
Cash  $90000 

Discount  on  Bonds  10000 

To  Bonds  in  Treasury  $100000 

Each  year  $5000  would  be  paid  as  interest  on  the  bonds.     The  entry 
would  be: 

Bond  Interest  $5000 

To  Cash  $5000 

But   the   $10000   discount  represents  interest   paid  in   advance,   one- 
twentieth  of  which  should  be  borne  by  each  year.     The  entry  would  be 
Bond  Interest  $500 

To  Discount  on  Bonds  $500 

The  real  charge  to  Profit  and   Loss  would  thus  be  $5500  yearly. 
If  bonds  are  sold  at  a  premium,   it  is  because  the  rate  of  interest 
is    high    considering    the    financial    standing    of    the    corporation.     The 


BONDS  AND  FUNDS  379 

premium   received   should   be   considered   as   h  reduction   of   the  interest 
charge  from  year  to  year  by  the  following  entry: 
Premium  on  Bonds 
To  Bond  Interest 

Very  often  if  the  discount  or  the  premium  is  small,  it  is  all  charged 
to   Profit  and  Loss  in  one  year. 

When  the  bonds  are  due  and  canceled  the  entry  is: 
Bonds 

To  Cash 

In  order  to  provide  for  the  payment  of  bonds  as  they  mature,  some 
provision  should  be  made  f<5r  the  setting  aside  of  such  a  sum  each  year 
so  that  at  maturity  sufficient  cash  or  other  assets  will  be  on  hand  to 
take  up  the  bonds.     This  is  usually  called  a  Sinking  Fund. 

A  Fund  is  a  sum  of  money  or  other  assets  set  aside  for  some  definite 
purpose.  The  reserving  of  profits  for  any  purpose,  such  as,  for  new 
buildings,  for  extensions,  etc.,  is  not  a  fund.  But  taking  profits  in 
the  form  of  money  or  other  assets  out  of  the  ordinary  assets  of  the 
business  and  putting  them  in  a  particular  place  constitutes  a  fund. 
This  fund  may  be  in  the  form  of  a  savings  account  or  in  the  form  of  a 
fund   deposited   with   a   trust   company   or   other   trustee. 

A  Fund  Account  is  always  an.  asset,  as  it  represents  assets  that 
have  been  set  aside.  The  fund,  when  set  aside  for  the  purpose  of  se- 
curing the  payment  of  money  to  creditors,  is  usually  given  into  the 
hands  of  a  trustee  of  the  fund..  Such  a  fund  for  the  purpose  of  secur- 
ing the  holders  of  the  bonds  of  a  corporation  is  called  a  Sinking   Fund. 

Sinking  Fund.  The  trustee  of  a  sinking  fund  periodically  receives 
cash  from  the  corporation  according  to  the  terms  of  the  issue  of  the 
bonds  and  the  conditions  of  the  trusteeship.  The  trustee  usually  in- 
vests the  money  in  approved  securities  and  adds  the  interest  received 
from  them  to  the  fund  itself.  The  entry  that  is  made  when  the  money 
is  turned  over  to  the  trustee  is: 

Sinking  Fund 
To  Cash 
The  interest  received   on   the  securities   will   be   entered   as   follows: 
Sinking  Fund 

To  Sinking  Fund  Interest 

In  this  way,  much  less  need  be  set  aside  than  the  proportionate 
amount  found  by  dividing  the  amount  of  the  bond  issue  by  the  number 
of  years  that  they  have  to  run.  For  example,  suppose  that  a  company 
has  issued  $250000  worth  of  20-year  bonds,  bearing  interest  at  5%.  If 
the  proportionate  amount  were  set  aside,  $12500  would  be  necessary 
yearly.  But  if  the  money  set  aside  each  year  can  be  invested  so  as  to 
yield  4%,  only  $8395  would  be  necessary  yearly. 


380  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Other  Funds.  A  corporation  may  set  aside  a  fund  for  some  purpose 
that  concerns  the  business  itself.  In  that  case  the  fund  is  usually  in  the 
form  of  a  savings  account,  a  special  account  in  the  bank,  or  stocks  or  bonds 
kept  for  a  specific  purpose,  and  usually  remains  in  control  of  the  corpora- 
tion itself.  Such  a  fund  would  be  an  Accidents  Fund,  a  Building  Fund,  an 
Insurance  Fund,  an  Employers'  Liability  Fund.  When  money  is  needed 
for  the  purpose  for  which  the  fund  was  created,  Cash  is  debited  and  the 
fund  account  is  credited. 

Exercise  94.  May  1.  The  C.  Jackson  Motor  Co.  has  voted  to  issue  $500000  First 
Mortgage  4%  bonds  to  run  for  20  years,  interest  payable  semi-annually. 

May  10.     $30000  of  these  bonds  have  been  subscribed  for  and  sold  at  par  for  cash. 
June  15.     The  balance  of  the  bond  issue  has  been  sold  for  cash  at  90. 
Make  the  necessary  entries. 

Exercise  95.    The  C.  Jackson  Motor  Co.  pays  the  semi-annual  interest  on  Novem- 
ber 1,  according  to  the  conditions  given  in  Exercise  95. 
Make  the  necessary  entry. 

Exercise  96.  In  making  statements  for  the  C.  Jackson  Motor  Co.,  on  December  31, 
according  to  the  conditions  given  in  Exercises  94  and  95,,  what  will  be  the  loss  on  these 
bonds  that  should  be  charged  to  this  year's  business?  What  entries  should  be  made  to 
show  the  loss  sustained? 

The  accrued  interest  from  November  1  must  be  considered  as  an  inventory  and  an  entry  must  be 
made  for  the  proportionate  part  of  the  discount  used. 

Exercise  97.  The  books  of  E.  B.  Foster  &  Co.  are  out  of  balance.  You  are  employed 
to  find  the  amount  of  the  difference,  to  make  whatever  corrections  can  be  made,  and  to 
make  an  adjusting  entry  to  make  the  books  balance.  The  books  of  entry  have  been 
destroyed  but  the  following  information  is  obtained  from  other  sources:  Cash -on  hand 
and  in  the  bank  amounts  to  $13285.90;  from  the  invoices  on  file,  the  total  purchases  are 
found  to  be  $13386.40;  from  the  duplicate  sales,  the  total  sales  are  found  to  be  $11218.20. 
The  posting  of  the  cash  book  and  of  the  journal  has  been  completed,  both  the  daily  and 
monthly  posting.  The  purchase  book  and  sales  book  have  been  posted  daily  but  not  in 
total.  The  accounts  on  the  general  Ledger  show  the  following  balances:  Capital  Stock, 
$50000;  Surplus,  $1478.60;  Treasury  Stock,  $5000;  Raw  Material,  $8550;  Factory  Expense, 
$212.40;  Accidents  Savings  Fund,  $575;  Heat,  Light,  and  Power,  $378.90;  Insurance, 
$136.80;  Freight  In,  $272.40;  Freight' Out,  $56.30;  Land  and  Buildings,  $20000;  Machinery, 
$5784.20;  Reserve  for  Depreciation  on  Machinery,  $115.68;  Reserve  for  Depreciation 
on  Buildings,  $200;  Reserve  for  Accidents,  $575;  Reserve  for  Bad  Debts,  $102.50;  Sales, 
Dr.,  $210.40;  Mortgages  Payable,  $8000;  Delivery  Equipment,  $1275;  Notes  Receivable, 
$3265.75;  Notes  Payable,  $412.60;  Notes  Receivable  Discounted,  $1236.50;  Accounts 
Receivable,  $5375.80;  Accounts  Payable,  $3213.25;  Stable  Expense,  $112.80;  Selling 
Expense,  $238.25;  Salaries,  $275;  Interest,  Dr.,  $38.90;  Office  Expense,  $137.80;  Discount 
on  Sales,  $124.30;  Discount  on  Purchases,  $311.75. 

a)  Make  the  necessary  entries  for  the  posting  of  the  totals  that  have  not  been  posted, 
and  include  them  in  the  proper  accounts. 

b)  Arrange  the  accounts  in  a  trial  balance  in  the  proper  order.  You  are  instructed 
to  place  the  difference  between  the  two  sides  in  the  Adjustment  account.  Your  knowl- 
edge of  accounts  should  tell  you  on  which  side  of  the  trial  balance  to  place  the  amount 
of  each  account. 


BONDS  AND  FUNDS  381 

REVIEW  QUESTIONS 

1 .  a)     What  is  meant  by  a  dividend?     b)    Who  has  the  power  to  declare  a  dividend? 

2.  Must  a  dividend  be  declared  if  there  are  sufficient  profits?     Explain. 

3.  If  a  corporation  has  a  surplus  from  previous  years  and  a  loss  for  the  current  year, 
may  a  dividend  be  declared? 

4.  What  entry  should  be  made  when  a  cash  dividend  is  declared? 

5.  What  entry  should  be  made  when  a  cash  dividend  is  paid? 

6.  a)     What  is  a  stock  dividend?    b)     How  do  the  entries  for  a  stock  dividend 
differ  from  those  of  the  ordinary  cash  dividend? 

7.  What  entries  should  be  made  if  the  board  of  directors  votes  to  reserve  a  part  of 
the  profits  for  accidents,  a  part  for  new  buildings,  and  a  part  for  loss  by  fire? 

8.  a)     What  is  the  effect  of  a  liability  inventory  in  Productive  Labor?    b)     How 
is  it  entered  on  the  books? 

9.  a)     What  is  the  effect  of  an  inventory  of  interest  accrued  on  Notes  Payable? 
b)     Of  discount  paid  in  advance  on  Notes  Receivable? 

10.  a)     What  is  the  effect   of   an   inventory   of   motor   truck   supplies  on  hand? 
b)     How  is  it  entered  on  the  books? 

11.  a)     What  is  a  bond?    b)     How  does  it  differ  from  a  note? 

12.  Distinguish  between  coupon  and  registered  bonds. 

13.  a)     What  entry  is  made  when  bonds  are  authorized?     b)     What  entry  is  made 
when  bonds  are  issued  ? 

14.  What  entry  is  made  when  bonds  are  sold  at  a  discount? 

15.  What  entry  is  made  when  bonds  are  sold  at  premium? 

16.  How  should  Discount  on  Bonds  be  treated  when  closing  the  books? 

17.  What  entries  should  be  made  when  bonds  are  issued  for  property  bought? 

18.  a)     What  is  a  fund?     b)     Describe  funds  for  at  least  three  different  purposes. 

19.  What  entry  is  made  when  a  fund  is  created? 

20.  What  entry  is  made  when  money  is  taken  from  the  fund  for  the  purpose  for 
which  it  was  created? 

MISCELLANEOUS  QUESTIONS  AND  PROBLEMS 

1.  a)  What  entry  should  be  made  when  money  is  stolen  from  the  business?  b) 
What  entry  should  be  made  when  money  is  embezzled  by  an  employee? 

2.  What  entry  should  be  made  when  a  delivery  horse  dies? 

3.  What  entry  should  be  made  when  merchandise  is  destroyed  by  fire? 

4.  What  entry  should  be  made  when  insurance  is  received  for  loss  on  merchandise? 

5.  A  company  has  at  the  end  of  a  fiscal  period  set  up  a  reserve  for  bad  debts.  Dur- 
ing the  next  year,  it  loses  an  account  of  the  Dobbs  Machinery  Co.  amounting  to  $680. 
What  entry  should  be  made? 

6.  What  entry  should  be  made  when  a  debtor  becomes  bankrupt  and  pays  75c 
on  the  dollar? 

7.  A  company  finds  after  its  books  have  been  closed  that  the  inventory  of  finished 
goods  has  been  incorrectly  computed.  The  inventory  should  have  been  $1000  less.  How 
would  you  adjust  it? 

8.  A  corporation  borrows  $10000  from  a  bank  on  its  note,  at  three  months,  at 
the  discount  rate  of  5%.  It  gives  as  security  for  this  loan  150  shares  of  stock  of  the  C. 
&  N.  W.  R.  R.  Co.,  of  a  par  value  of  $100  per  share  and  a  market  value  of  121  £.  What 
entries  would  be  made? 


382  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

9.  Suppose  that  in  problem  8,  the  corporation  cannot  pay  the  $10000  at  maturity 
and  that  the  bank  sells  the  stock  at  118^.  It  deducts  the  amount  of  the  debt  and  $25 
expenses  and  returns  the  balance  to  the  corporation.     What  entries  should  be  made? 

10.  A  corporation  has  discounted  C.  Berg's  note  for  $1000,  payable  60  days  after 
May  9,  and  bearing  interest  at  6%,  at  the  First  National  Bank.  At  maturity,  the  maker 
cannot  pay  it,  and  the  corporation  pays  it  by  voucher  check  in  favor  of  the  bank,  includ- 
ing interest  and  protest  fees,  $1.25.     Make  the  necessary  entries. 

11.  What  would  be  the  advantage  of  using  Notes  Receivable  and  Notes  Payable 
books  as  books  of  entry  instead  of  as  auxiliary  books? 

12.  How  should  the  Notes  Receivable  and  Notes  Payable .  books  be  posted  daily 
and  monthly  if  these  books  were  used  as  books  of  entry? 

13.  The  present  market  value  of  raw  material  is  higher  than  the  cost.  At  what 
price  should  it  be  inventoried?     Why? 

14.  The  present  market  value  of  raw  material  is  below  cost.  At  what  price  should 
it  be  inventoried?    Why? 

15.  A  factory  that  manufactures  wire  fence,  manufactures  also  the  machines  that 
make  the  wire  fence,  both  for  its  factory  and  for  other  factories.  At  what  price  should 
a  machine  of  this  kind  manufactured  and  used  by  the  same  company  be  charged?  Should 
it  be  the  cost  to  manufacture,  the  selling  price  to  other  factories,  or  a  price  between  these 
two? 

16.  A  retail  store  has  four  departments;  hardware,  stoves  and  ranges,  farm  imple- 
ments, and  automobile  supplies.  Cash  sales  are  kept  by  departments  and  entered  in 
the  cash  book  only.  The  purchase  book  and  sales  book  are  kept  by  departments.  Three 
ledgers  are  used.  The  business  receives  many  notes  on  account  of  sales  of  farm  imple- 
ments and  discounts  these  notes  at  the  bank.  All  payments  are  made  by  check  but  the 
voucher  system  is  not  used.  Draw  up  books  of  entry  suitable  for  this  business  and  make 
entries  in  them  to  show  that  you  understand  their  use.  Then  show  the  closing  of  each 
of  these  books  of  entry. 

17.  The  sales  of  merchandise  for  a  year  amounted  to  $13750;  the  purchases  amounted 
to  $9325;  the  inventory  on  hand  at  the  beginning  of  the  year  amounted  to  $7386.  Find 
the  inventory  at  the  end  of  the  year  if  the  sales  were  made  at  a  profit  of  20%.  Show  the 
Merchandise  Trading  account  closed. 

18.  A  business  shows  a  profit  of  $3125  for  the  year,  and  a  net  worth  at  the  end 
of  the  year  of  $7394.50.  What  was  the  capital  at  the  beginning  of  the  year  if  there  were 
withdrawals  amounting  to  $500? 

19.  The  business  of  Hiller  &  White  shows  a  profit  for  the  year  of  $3762.50.  They 
are  equal  partners.  Hiller's  net  worth  is  $1276  after  his  share  of  the  profit  has  been  entered 
and  White's  is  $1125.80.     Hiller  withdrew  during  the  year  $450,  and  White,  $350. 

Find  the  condition  of  each  account  at  the  beginning  of  the  year  and  show  each  capi- 
tal account  closed. 

20.  The  C.  L.  Landers  Mfg.  Co.  has  sustained  losses  by  fire,  as  follows:  Raw 
Material,  $1375.60;  Finished  Goods,  $1998.25;  Machinery,  $3750;  Buildings,  $5250.  The 
insurance  company  has  settled  for  the  insurance  and  paid  cash  as  follows:  Raw  Material, 
80%;  Finished  Goods,  80%;  Machinery,  70%;  Buildings,  75%.  There  is  on  the  books 
an  unexpired  premium  of  $135.80,  of  which  $62.70  is  lost  on  account  of  the  fire.  There 
are  also  accounts  for  Depreciation  on  Machinery  for  $150  on  a  total  valuation  of  $7500, 
and  for  Depreciation  on  Buildings  amounting  to  $250,  on  a  total  valuation  of  $12500. 

Make  the  necessary  entries  to  adjust  the  fire  loss. 

In  making  the  entries  for  this  problem,  the  depreciation  on  the  assets  that  were 
destroyed  must  be  taken  out  of  the  Depreciation  accounts  and  placed  in  the  asset  accounts. 
The  final  entries  should  be  made  in  such  a  way  as  to  leave  in  the  asset  accounts  the  cost 
value  of  the  assets  remaining  after  the  loss  by  fire. 


.    APPENDIX 
ANOTHER  METHOD  OF  KEEPING  THE  BANK  ACCOUNT 

The  most  common  method  of  keeping  a  bank  account  has  been  given,  but  many 
accountants  and  bookkeepers  prefer  a  different  method  based  on  the  statements  rendered 
by  banks  at  the  end  of  each  month. 

When  a  bank  renders  a  statement  of  account  to  a  depositor  at  the  end  of  the  month, 
the  sum  of  the  balance  at  the  beginning  of  the  month  and  of  the  deposits  during  the  month 
is  shown  in  one  column.  In  another  column,  the  checks  are  listed  in  detail  and  the  total 
found.  Then,  the  balance  is  found  by  deducting  the  total  checks  from  the  sum  of  the 
balance  at  the  beginning  of  the  month  and  the  deposits  during  the  month. 

Because  of  this  method  of  making  out  the  bank  statement,  it  is  very  desirable  to 
show  the  results  in  the  check  book  in  the  same  way.  If  this  is  done,  as  in  the  illustration 
on  page  ii,  deposits,  including  collections  and  notes  discounted,  would  be  entered  on  the 
left  check  stub  only.  Each  deposit  would  be  added  to  the  amount  already  deposited, 
and  at  the  foot  of  each  left  check  stub,  the  total  would  be  forwarded  to  the  top  of  the  next 
left  check  stub.  At  the  end  of  the  month,  the  total  shown  on  the  last  left  check  stub  should 
agree  with  the  sum  of  the  balance  and  the  deposits  on  the  bank  statement. 

In  the  same  way,  on  the  right  check  stub,  the  amount  of  each  check  is  added  to  those 
previously  written  during  the  month  and  the  total  of  each  page  of  the  right  check  stub 
is  forwarded  to  the  top  of  the  next  right  check  stub.  Nothing  is  entered  on  the  right  check 
stub  but  checks,  and  notes  and  drafts  charged.  At  the  end  of  the  month  the  total  on  the 
right  check  stub  should  agree  with  the  total  checks  on  the  bank  statement,  unless  some 
of  the  checks  issued  have  not  yet  been. paid  by  the  bank.  This  can  easily  be  proved  by 
reconciling  the  bank  statement  with  the  check  book. 

In  proving  cash  at  any  date  during  the  month,  the  difference  between  the  total 
deposits,  including  the  balance  at  the  beginning  of  the  month,  and  the  total  checks  for 
the  month  is  found.  If  desired,  the  balance  may  be  inserted  in  the  explanatory  column 
of  the  left  check  stub  like  the  illustration,  but  the  two  stubs  must  not  be  balanced  till  the 
end  of  the  month. 

At  the  end  of  each  month,  the  two  stubs  are  balanced  and  the  balance  brought 
down  below  the  ruling  on  the  left  check  stub,  like  the  illustration  on  page  ii.  This  bal- 
ance is  the  only  amount  from  the  previous  month  that  should  be  used  for  the  next  month. 
As  has  been  explained,  it  must  agree  with  the  balance  on  the  bank  statement,  unless 
there  are  checks  outstanding  which  have  not  yet  been  paid  by  the  bank. 

Although  this  method  is  not  as  simple  for  the  beginner  as  the  method  of  adding 
deposits  and  subtracting  checks,  it  is  preferred  by  many  because  it  is  easier  to  compare 
the  results  at  the  end  of  the  month  with  the  bank  statement,  it  is  easier  to  check  results 
with  the  cash  book,  and  also  because  most  persons  make  fewer  mistakes  in  adding  than 
in  subtracting. 


11. 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 
METHOD  OF  KEEPING  THE  BANK  ACCOUNT 

Left  Check  Stub  Right  Check  Stub 


3o 


3/ 


Forwarded 


/3o>So 


fOj2- 


/■3*J^  /7*t/.  So 


/ 


4-/3  c 


1&>     Date. 


30      1 


Forwarded 

Nn.    7  7-2- 


5^ 


U?w?s 


1^_19^=. 


-*£L<<LLl 


Discount. 


Amount 


No.  /?.? 


Date. 


To 


>^?y  3/     19— 


.  £Lda&^EL4gCg2£» 


^     Fnr  ^(Ls,**SlZ*(-f72jr.y- 


j£     Discount 2^% Z^_ 

I! 

^  K  Amount 


^rX 


J^~ 


33S~0 


7/0 


C 


fo 


J~0 


■  Uam/. 


3/ 


Forwarded 


A^-a^iz^yi^c^^- 


SW/ 


S¥iA/ 


/3fo 


7<s~ 


« 


£ 


\S~ 


Cs~ 


tt 


Forwarded 
No. 


i 


Date. 
To_ 


.19. 


For. 


/3fo 


SW/ 


3o 
6^ 


£; 


APPENDIX  .  iii. 

SUPPLEMENTARY  SET  A— A  THEORY  SET 

This  set  is  intended  to  be  used  as  a  review  of  Set  VI,  or  it  may  be  used  to  precede 
Set  VII. 

Enter  the  following  transactions  on  manuscript  paper  used  for  the  books  of  entry 
as  in  Set  VI.  Use  the  purchase  book  (left  side  only),  the  sales  book,  the  two-column 
journal,  and  the  columnar  cash  book  with  columns  for  Amount  to  be  Credited,  Merchan- 
dise Discount  Dr.  and  Cash  Received  on  the  Receipts  side,  and  for  Amount  to  be  Debited, 
Expense,  Merchandise  Discount  Cr.,  and  Cash  Paid  on  the  Payments  side. 

February  1.  Robert  Davis  and  James  Sanborn  have  today  formed  a  copartnership 
under  the  firm  name  of  Davis  &  Sanborn,  to  engage  in  the  Wholesale  Dry  Goods 
business  at  210  Grand  Avenue. 

Robert  Davis  invests  the  following:  Stock  of  dry  goods,  inventoried  at  $4735.75; 
office  and  store  fixtures,  inventoried  at  $125;  account  of  C.  S.  Lowe,  $1781.50;  account 
of  J.  A.  Roth,  $525.75;  cash,  $1939.50.  He  owes  the  following,  which  the  business  assumes: 
Account  owed  D.  Evans  &  Co.,  $642.50;  note  in  favor  of  National  Exchange  Bank,  dated 
December  15,  payable  90  days  after  date,  for  $5000. 

James  Sanborn  invests  the  following:  C.  E.  King's  note  for  $2000,  dated  January 
2,  payable  60  days  after  date,  with  interest  at  6%;  5  tons  coal  at  $6.25;  two  C.  M.  &  St. 
Paul  bonds  at  par,  $2000;  cash,  $2039.65;  He  owes  the  following,  which  the  business 
assumes:  account  owed  D.  E.  James,  $785.90;  note  favor  First  National  Bank,  dated 
January  14,  payable  30  days  after  date,  for  $2500. 

•    Wherever  discount  is  to  be  computed,  it  should  be  at  6%. 

It  is  also  agreed  that  the  partners  shall  share  profits  and  losses  in  the  following 
proportion:  Robert  Davis,  three-fifths;  James  Sanborn,  two-fifths.  It  is  further  agreed 
that  each  partner  shall  be*  credited  monthly  with  $125  salary,  which  is  to  be  charged  to 
the  expenses  of  the  business.  Each  partner's  withdrawals  are,  by  agreement,  limited 
to  $125  a  month. 

February  2.     Paid  the  Russell  Real  Estate  Co.  for  rent  of  store  for  one  month,  $100. 

February  3.     Bought  a  typewriter  of  the  Office  Sales  Co.  for  cash,  $75. 

Bought  an  invoice  of  dry  goods  of  J.  A.  Scott  &  Co.,  on  the  terms,  2/10,  n/30,  for 
$1725. 

February  4-  Bought  office  books  and  stationery  of  H.  H.  West  &  Co.  for  cash, 
$25.75. 

Bought  an  invoice  of  dry  goods  of  M.  N.  Moser  &  Co.,  for  $2375.60,  and  accepted 
their  30-day  draft  in  payment. 

February  5.  Sold  C.  L.  Weeks,  on  account,  30  days,  25  pc.  taffeta  ribbon  at  $1.75; 
225  yd.  French  gingham  at  12^c;  24  doz.  ladies'  kid  gloves  at  $9.75. 

Insured  the  stock  of  dry  goods  and  the  store  fixtures  for  $9500,  for  one  year,  at  the 
rate  of  65c  for  each  $100. 

Sold  H.  M.  Marks,  2/10,  n/30,  425  yd.  bleached  sheeting  at  lie;  30  doz.  ladies' 
lisle  hose  at  $2.75;  515  yd.  organdie  at  23c. 

Open  accounts  in  a  manuscript  ledger,  three  on  a  page,  and  post  the  entries  that 
have  been  made.    Hereafter  you  will  post  at  the  end  of  each  week's  work. 

February  7.  Sold  C.  A.  Austin,  on  the  terms,  sight  draft  for  $200,  balance  on 
account,  850  yd.  nainsook  at  10£c;  625  yd.  art  ticking  at  17c;  25  doz.  ladies'  linen  hand- 
kerchiefs at  $1.85. 

Sold  B.  L.  Lane,  3/5,  2/10,  n/30,  325  yd.  taffeta  silk  at  95c;  25  doz.  men's  cotton 
hose  at  $1.75;  475  yd.  serge  dress  goods  at  75c. 

Bought  a  delivery  truck  of  the  Foster  Truck  Co.  for  $1375,  on  the  terms:  cash,  $500; 
balance,  on  account,  30  days. 


iv.  .        METROPOLITAN  SYSTEM  OP  BOOKKEEPING 

Returned  to  J.  A.  Scott  &  Co.,  12  doz.  ladies'  silk  hose  and  received  credit  for  them 
at  $2.45. 

Paid  freight  bill  on  incoming  goods,  $78.25. 

February  8.  Bought  an  invoice  of  dry  goods  of  the  Norris  Dry  Goods  Co.,  for 
$2416.75.    Gave  my  note  at  30  days,  with  interest  at  6%,  for  $1500,  in  part  payment. 

Insured  the  delivery  truck  for  one  year  for  $1000,  at  the  rate  of  75c  for  each  $100 
in  the  risk. 

Sold  D.  L.  Marsh  &  Co.,  2/10,  n/30,  125  yd.  cluny  lace  at  $1.65;  25  doz.  pair  ladies' 
silk  gloves  at  $8.75;  725  yd.  cambric  at  12 Jc. 

Contracted  for  a  display  advertisement  in  the  Daily  Press,  and  paid  cash  for  it, 
$57.50. 

February  9.  Bought  an  invoice  of  dry  goods  of  O.  M.  Rice  &  Co.,  2/15,  n/30, 
for  $936.20. 

C.  A.  Austin  returned  5  doz.  ladies'  linen  handkerchiefs  for  which  we  gave  him 
credit  at  $1.85. 

Bought  of  the  Adams  Supply  Co.,  50  gal.  gasoline  at  18c  and  a  can  of  oil  for  75c, 
for  cash. 

Discounted  at  National  Exchange  Bank,  at  6%,  the  note  of  C.  E.  King,  received 
on  the  first  as  a  part  of  James  Sanborn's  investment. 

February  10.  Sold  C.  N.  Barlow  &  Co.,  on  account,  30  days,  425  yd.  percale  at 
8^c;  615  yd.  India  linen  at    15£c;   540   yd.   organdie   at  27c;  235  yd.  wool  voile  at  72c. 

Sold  J.  A.  Cone,  on  the  terms,  draft  with  bill  of  lading  attached,  60  doz.  ladies' 
silk  hose  at  $3.85. 

The  bank  reports  the  sight  draft  for  $200,  drawn  on  C.  A.  Austin,  on  the  7th,  collected. 
Collection  charge,  iV%« 

February  11.  Paid  the  balance  of  the  invoice  bought  from  J.  A.  Scott  &  Co.  on 
the  3d. 

Received  of  C.  L.  Weeks,  his  note  at  30  days,  for  $150,  on  account. 

Sold  C.  N.  Simpson  &  Co.,  2/10,  n/30,  75  pc.  satin  ribbon  at  $1.95;  385  yd.  wash 
silk  at  47 \c;  225  yd.  serge  dress  goods  at  85c.  On  their  order  the  goods  were  shipped  to 
B.  N.  Willis  and  the  freight,  amounting  to  $24.25,  was  prepaid  and  charged  to  C.  N. 
Simpson  &  Co. 

February  12.     Received  of  B.  L.  Lane,  cash,  for  his  invoice  of  the  7th,  less  discount. 

Received  of  C.  N.  Barlow  &  Co.,  their  note  at  30  days,  for  $250,  on  account. 

Paid  D.  Evans  &  Co.,  cash,  in  full  of  account,  $642.50. 

Bought  an  invoice  of  dry  goods  of  D.  N.  Newton  &  Co.,  on  account,  30  days,  for 
$1850. 

Post  the  entries  made  the  past  week. 

February  Ik.  Sold  N.  A.  Jackson,  2/10,  n/30,  360  yd.  cotton  voile  at  28 £c;  20 
pc.  velvet  ribbon  at  $2.65;  345  yd.  corduroy  at  72c. 

Received  of  C.  S.  Lowe,  cash,  on  account,  $500. 

Returned  to  O.  M.  Rice  &  Co.,  75  yd.  wash  silk  for  which  we  received  credit  at  35c. 

February  15.  Sold  B.  L.  Dewey  175  yd.  wool  voile  at  75c.  Gave  the  shipment 
to  the  American  Express  Co.  to  collect  on  delivery. 

Received  cash  of  H.  M.  Marks  for  the  invoice  sold  him  on  the  5th,  less  discount. 

Paid  $5  for  postage  stamps. 

February  16.     Each  partner  withdrew  $50  from  the  business  for  personal  use. 

Received  of  J.  A.  Roth,  cash,  on  account,  $400. 

The  Norris  Dry  Goods  Co.  has  agreed  to  cancel  our  note  for  $1500  on  receipt  of  a 
check  for  the  face  of  the  note  and  the  interest  to  date.    The  payment  has  been  made. 

Sold  C.  A.  Francis,  2/10,  n/30,  25  doz.  ladies'  kid  gloves  at  $11.75;  18  doz.  men's 
kid  gloves  at  $13.25. 


APPENDIX  v. 

February  17.  Bought  6  tons  of  coal  of  the  City  Coal  Co.  at  $6.15,  and  paid  cash 
for  it. 

Received  of  C.  L.  Weeks,  cash,  on  account,  $100. 

February  18.  Received  of  D.  L.  Marsh  &  Co.  cash,  for  invoice  of  the  8th,  less 
discount. 

The  bank  reports  the  draft  with  bill  of  lading  attached,  on  J.  A.  Cone,  given  to  the 
bank  on  the  10th  collected.    Collection  charge,  -fa%. 

Paid  $12.50  for  repairs  to  the  delivery  truck. 

February  19.  Received  of  C.  N.  Simpson  &  Co.,  cash,  for  invoice  of  the  11th,  less 
discount,  and  for  the  charge  of  the  same  date. 

Sold  D.  N.  Stoner,  on  account,  30  days,  40  pr.  battenberg  curtains  at  $7.75;  50  doz. 
men's  silk  hose  at  $3.85. 

Received  of  C.  S.  Lowe,  cash,  on  account,  $1000. 

Post  the  entries  made  the  past  week. 

February  21.  Sold  C.  A.  Austin,  on  account,  30  days,  350  yd.  bleached  sheeting 
at  12c;  560  yd.  bleached  cheesecloth  at  51  c;  725  yd.  unbleached  muslin  at  7|c. 

Sold  C.  L.  Weeks,  on  account,  30  days,  30  doz.  ladies'  silk  gloves,  at  $8.15;  15  pc. 
satin  ribbon  at  $1.62^.    Received  cash,  $100,  in  part  payment. 

The  C.  N.  Hine  Dry  Goods  Co.  has  offered  us  a  stock  of  silks  at  a  bargain  for  cash. 
The  offer  has  been  accepted  and  the  cash,  $1785  paid. 

February  22.     Paid  cash  for  a  new  tire  for  the  delivery  truck,  $32.50. 

Received  of  the  American  Express  Co.  the  returns  from  the  sale  to  B.  L.  Dewey  on 
the  15th.    The  express  company  charged  75c  collection. 

Sold  D.  E.  Cooper,  3/5,  2/10,  n/30,  45  doz.  boys'  cotton  hose  at  $1.75;  65  doz.  girls' 
cotton  hose  at  $1.60. 

Sold  C.  A.  Ellis  on  note  at  30  days,  375  yd.  wash  silk  at  42|c;  435  yd.  foulard  at 
65c.    The  note  is  received  with  the  order. 

February  23.     Paid  D.  N.  Newton  &  Co.,  cash,  on  account,  $1000. 

Received  of  C.  A.  Austin,  cash,  on  account,  $50,  and  of  N.  A.  Jackson  for  invoice  of 
the  14th,  less  discount. 

Sold  F.  L.  Cole,  on  account,  30  days,  415  yd.  nainsook  at  12|c;  360  yd.  longcloth 
at  10£c;  525  yd.  ticking  at  14c. 

Sold  C.  N.  Barlow  &  Co.,  on  account,  30  days,  125  pr.  net  curtains  at  $2.35;  75  pr. 
scrim  curtains  at  $1.15. 

February  24.  Discounted  our  note  for  $1200,  payable  60  days  after  date,  at  the 
National  Exchange  Bank  at  5%.  Gave  the  two  C.  M.  &  St.  Paul  bonds  (par  $2000)  as 
security  for  the  loan. 

Make  a  memorandum  of  the  security  in  the  journal  and  make  a  note  of  it  in  the 
Bonds  account  in  the  ledger. 

Paid  Norris  Dry  Goods  Co.  cash,  on  account,  $800.  , 

Paid  for  repairs  to  the  office  furniture,  $4.50. 

Paid  O.  M.  Rice  &  Co.  the  balance  of  the  invoice  of  the  9th,  less  discount. 

February  25.  Sold  J.  L.  Finch  &  Co.,  2/10,  n/30,  15  pc.  taffeta  ribbon  at  $1.95; 
250  yd.  foulard  at  62£c;  36  pr.  net  curtains  at  $2.65. 

Paid  $2.50  for  postage  stamps. 

Sold  S.  L.  Stevens,  for  cash,  less  3%,  16  doz.  ladies'  kid  gloves  at  $8.95;  25  doz. 
ladies'  silk  hose  at  $2.85. 

Paid  D.  E.  James,  cash,  on  account,  $500. 

February  26.     Received  cash  of  C.  A.  Francis,  for  invoice  of  the  16th,  less  discount. 

Received  cash  of  D.  E.  Cooper  for  invoice  of  the  22d,  less  discount. 

Received  of  C.  N.  Barlow  &  Co.,  cash,  on  account,  $100. 

Bought  an  invoice  of  dry  goods  of  O.  M.  Rice  &  Co.,  for  $1275.60.  Accepted  their 
60-day  draft  for  $500,  in  part  payment. 


vi.  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

Sold  B.  L.  Lane,  3/5,  2/10,  n/30,  315  yd.  foulard  at  62c;  18  pc.  taffeta  ribbon  at 
$1.89. 

February  28.  Paid  salaries  as  follows:  bookkeeper,  $60;  salesman,  $60;  delivery- 
man,  $55. 

Paid  freight  bills  in  cash,  $127.75. 

Make  an  entry  to  transfer  $28.50  of  the  delivery  expense  to  purchases.  Credit 
each  proprietor  for  a  month's  salary  according  to  the  articles  of  copartnership. 

Post  the  entries  made. 

CLOSING  "WORK 

1.  Close  the  books  of  entry  and  post  them. 

2.  Take  a  trial  balance. 

3.  Use  the  following  inventories  and  make  Trading  and  Profit  and  Loss  statements : 
Merchandise  inventory,  including  freight  on  goods  unsold,  $10763.20;  Expense  inventory, 
$24.35;  Furniture  and  Fixtures,  1%  depreciation;  Delivery  Equipment,  2%  depreciation; 
Insurance,  unexpired,  $64.50;  Advertising,  unused,  $17.25;  C.  M.  &  St.  Paul  Bonds,  at 
par. 

4.  Make  a  statement  of  assets  and  liabilities. 

5.  Open  a  Merchandise  Trading  and  a  Profit  and  Loss  account,  and  close  all  ac- 
counts. 

6.  Take  a  proof  trial  balance  of  the  ledger  after  closing. 

7.  Submit  all  of  your  papers  to  your  teacher  for  correction. 

SUPPLEMENTARY  SET  B— A  THEORY  SET 

This  set  may  be  used  to  precede  Set  VII. 

Enter  the  following  transactions  on  manuscript  paper  used  for  the  books  of  entry 
as  in  Set  VII.  Use  the  purchase  book  (left  side  only);  the  sales  book  or  sales  journal; 
the  four-column  journal  with  columns  for  Accounts  Payable,  General  Dr.,  General  Cr., 
and  Accounts  Receivable;  and  the  columnar  cash  book  with  columns  for  General,  Ac- 
counts Receivable,  Sales  Discount,  and  Cash  Dr.  on  the  Receipts  side,  and  for  General, 
Expense,  Accounts  Payable,  Purchases  Discount,  and  Cash  Cr.  on  the  Payments  side. 

March  1.  John  Myers  and  Albert  Thomas  have  today  formed  a  copartnership 
under  the  firm  name  of  J.  Myers  &  Co.,  to  engage  in  the  wholesale  furniture  business 
at  315  Front  St. 

John  Myers  invests  cash,  $6000,  and  Albert  Thomas  invests  cash,  $3000.  It  is 
agreed  that  John  Myers  shall  share  two-thirds  of  the  profits  or  losses,  and  Albert  Thomas, 
one-third.  It  'is  further  agreed  that  John  Myers  shall  be  paid  $100  salary  monthly  and 
Albert  Thomas,  $75  monthly,  both  to  be  charged  to  the  expenses  of  the  business.  Neither 
partner  shall  withdraw  anything  from  the  business. 

March  2.     Paid  Goodwin  Realty  Co.  for  rent  of  store  for  one  month,  $75. 

March  3.  Bought  an  invoice  of  furniture  of  J.  N.  Bradley  &  Co.,  on  the  terms, 
account,  30  days,  for  $2375.80. 

March  4-     Bought  a  typewriter  of  C.  L.  Carey  &  Co.,  for  cash,  $85. 

March  5.     Sold  D.  E.  Morton,  2/10,  n/30,  an  invoice  of  furniture,  $613.75. 
Paid  for  postage  stamps,  $3. 

Bought  an  invoice  of  furniture  of  J.  A.  Everts  &  Co.  for  $1825.60,  and    accepted  their 
30-day  draft  in  payment. 

March  7.     Took  furniture  valued  at  $125.75  from  the  stock  for  office  furniture. 

Insured  the- stock  of  furniture  and  the  office  furniture  for  $4000,  for  one  year,  at  the 
rate  of  70c  for  each  $100. 


APPENDIX  vii. 

March  8.  Sold  F.  N.  Simmons  an  invoice  of  furniture  amounting  to  $875.80  and 
received  his  note  at  30  days,  with  interest  at  6%,  for  $500,  in  part  payment. 

Returned  furniture  invoiced  at  $47.80  to  J.  N.  Bradley  &  Co.,  and  received  credit 
for  it. 

March  9.  Bought  a  delivery  truck  of  the  Davis  Truck  Co.  for  $1150.  Paid  cash, 
$600,  and  gave  a  note  at  30  days  for  the  balance.  (The  account  for  the  Davis  Truck  Co. 
should  be  opened  up  in  the  general  ledger). 

March  10.  Sold  C.  D.  Foss,  on  account,  30  days,  an  invoice  of  furniture  amounting 
to  $436.50. 

March  11.     Bought  gasoline  of  the  Auto  Supply  Co.  for  cash,  $10.50. 

Paid  freight  bill  on  incoming  goods,  $142.75. 

March  12.  D.  E.  Morton  returned  furniture  invoiced  at  $37.25,  for  which  we  gave 
him  credit. 

March  14-     Sold  L.  N.  Perry,  on  account,  30  days,  an  invoice  of  furniture,  $712.20. 

Bought  an  invoice  of  furniture  of  the  C.  L.  Barton  Furniture  Co.,  on  the  terms, 
2/10,  n/30,  for  $2156.35. 

March  15.  Received  of  D.  E.  Morton,  cash,  for  the  balance  of  the  invoice  of  the  5th, 
less  discount. 

March  16.     Sold  H.  L.  Ray,  2/15,  n/30,  an  invoice  of  furniture  for  $527.75. 

March  17.     Paid  J.  N.  Bradley  &  Co.  cash,  on  account,  $500. 

March  19.     Received  of  F.  N.  Simmons,  cash,  on  account,  $200. 

March  21.     Paid  cash  for  5  tons  of  coal  at  $4.85. 

March  22.  Bought  a  store  building  and  lot  of  Bolton  Realty  Co.,  for  $12500.  Paid 
cash,  $6000,  and  gave  a  note  at  six  months,  with  interest  at  5%  for  the  balance. 

March  23.  Bought  an  invoice  of  furniture  of  D.  E.  Warner  &  Co.,  on  the  terms, 
2/10,  n/30,  $1273.90. 

March  24.     Paid  C.  L.  Barton  Furniture  Co.  for  invoice  of  the  14th,  less  discount. 

March  26.     Sold  C.  E.  Willis,  on  account,  30  days,  an  invoice  of  furniture,  $473.75. 

March  29.     Received  of  H.  L.  Ray,  cash,  for  invoice  of  the  19th,  less  discount. 

March  31.  Paid  salaries  as  follows:  John  Myers,  $100;  Albert  Thomas,  $75;  Charles 
Case,  deliveryman,  $60. 

CLOSING  WORK 

1.  Open  a  general  ledger,  a  purchase  ledger,  and  a  sales  ledger.  Put  four  accounts 
on  a  page. 

2.  Close  the  books  of  entry  and  post  them. 

3.  Make  a  proof  of  the  sales  ledger. 

4.  Make  a  proof  of  the  purchase  ledger. 

5.  Take  a  trial  balance  of  the  general  ledger. 


SINGLE  ENTRY 


Development  of  Single  Entry.  The  first  necessity  that  arose  for  a 
record  of  a  business  transaction  was  when  something  was  bought  or 
sold  on  account.  The  proprietor  found  it  necessary  to  keep  some 
record  showing  with  whom  he  had  the  dealings,  whether  a  purchase  or  a 
sale,  the  amount,  and  when  it  should  be  paid.  This  record  was  first  a 
very  temporary  one  kept  on  slips  of  paper  and  torn  up  when  the  in- 
debtedness was  canceled.  A  more  permanent  record  was  found  neces- 
sary  and   the   day   book   was   introduced. 

The  Day  Book.  The  day  book  was  at  first  used  to  record  all 
transactions  with  persons.  The  form  of  the  entry  at  first  was  simply  a 
brief  statement  of  the  transaction  in  the  form  of  a  sentence  or  clause, 
as,  "Sold  Brown  &  Co.  an  invoice  of  goods,  terms  30  days,  for  $450," 
with  the  items  sold  recorded  underneath.  The  object  of  this  record  was 
to  show  the  indebtedness  of  Brown   &   Co.   to  the  business. 

In  this  form  of  entry,  frequently  no  ledger  was  used,  but  the  in- 
debtedness was  simply  marked  paid  on  the  day  book.  This  was  a  very 
crude  form  of  entry  and  soon  was  replaced  by  a  more  formal  one  which 
was  transferred  to  a  ledger.  The  formal  entry  would  be  as  follows: 
"Brown  &  Co.,  30  days,  Dr.  $450,"  with  the  items  sold  detailed  under- 
neath. 

The  principal  object  of  single  entry  is  to  show  what  others  owe  the 
business  and  what  the  business  owes  others.  Accounts  are  kept  with 
persons  only.  For  that  reason,  each  entry  has  simply  one  effect,  a 
debit  or  a  credit  effect.  No  accounts  are  kept  with  impersonal  accounts, 
whether   real    or    nominal. 

Single  Entry  Contrasted  with  Double  Entry.  Because  of  the  fact 
that  single  entry  keeps  a  record  of  personal  accounts  only  and  shows 
a  debit  or  a  credit  effect,  it  differs  from  double  entry  in  these  par- 
ticulars. 

1.  No  matter  what  books  of  entry  are  used,  each  entry  has  but 
one  effect. 

2.  No  trial  balance  can  be  made  and  no  proof  of  the  correctness 
of  the  ledger  can  be   made   without  a  great   deal   of  difficulty. 

viii. 


APPENDIX 


IX. 


3.  Since  no  nominal  accounts  are  kept,  no  statement  of  the  profits 
and  losses  of  the  business  can  be  made.  The  profit  or  the  loss  can  be 
found  in  total  only. 

4.  There  can  be  no  proof  of  the  correctness  of  the  results  as  in 
double  entry. 

5.  Cash  transactions,  whether  for  a  real  or  a  nominal  element 
are  entered  in  the  same  way,  as,  a  motor  truck,  a  real  element,  and 
gasoline  for  it,   a  nominal  element. 

Disadvantages  of  Single  Entry.  As  a  system  of  keeping  accounts 
it  is  not  adapted  to  any  but  a  small  business  in  which  the  transactions 
are  chiefly  for  cash.  Competition  in  modern  business  makes  it  neces- 
sary to  have  detailed  information  in  reference  to  purchases,  sales,  and 
itemized  expenses.  Single  entry  can  furnish  but  little  information  of 
this  character. 

It  may  be  used  by  executors,  assignees,  and  trustees  where  the 
object  is  to  account  for  certain  assets  and  liabilities  without  carrying 
on  a  business. 

Books  of  Entry.  Most  single  entry  bookkeepers  use  the  day  book  or 
journal  and  the  cash  book.  Many  also  use  the  sales  book,  and  a  few 
use  the  purchase  book  also.  A  bill  or  note  book  may  also  be  used  as  an 
auxiliary  book.  In  this  set  the  journal,  cash  book,  and  sales  book  will 
be  used. 

The  Journal.  The  form  of  the  journal  is  the  ordinary  two-column 
journal  except  that  the  first  amount  column  is  used  for  items  and  the 
second  for  the  amount  to  be  posted. 

Model  Journal 
Milwaukee,  Wis.,  January  1,  19 — 


I,  C.  D.  Simonds,  have  this  day  begun  business, 
investing  the  following: 
C.  D.  Simonds  Cr. 

Cash  On  hand 

Mdse.  Per  inventory 

3. 
James  Saunders  Cr. 

Invoice  on  account,  10  days 
4. 
David  Logan  Dr. 

Our  note  at  30  days,  with  interest  at  6% 
P.  D.  Arndt  Cr. 

2  bbl.  Apples  returned 


4000 

3500 

— 

500 

1275 

500 
6 

50 


The  Cash  Book.     The  single  entry  cash  book  is  similar  to  a  two- 
column  cash  book  in  double  entry.     No  entries  are  posted  except  those 


x.  METROPOLITAN  SYSTEM  OP  BOOKKEEPING 

that   pertain   to   personal   accounts.     All   other   entries   are   checked.     All 
cash   transactions   are   entered   in   the   cash   book   only. 


19— 


Model  Cash  Book 
Cash  Receipts 


Left  Page 


Jan. 

1 
3 
6 

8 

9 

10 

15 

V 

V 

5 
6 
6 

V 
V 

CD.  Simonds 
Merchandise 
J.  L.  Merz 
D.  E.  Kramer 
C.  J.  Ford 
Merchandise 
Notes  Receivable 

Investment 

Cash  sales 

On  account 

Invoice  of  the  3d 

On  account 

Cash  sales 

S.  N.  Cook's  note 

3500 

37 

100 

215 

200 

62 

75 

25 

85 

i 
4190 

10 

4190 

10 

19 

Cash  Payments 

Right  Page 

Jan. 

1 

V 

Office  Furniture 

Desk  and  chair 

38 

95 

3 

V 

Merchandise 

Invoice  of  D.  Jasper 

218 

25 

5 

V 

Horse  and  wagon 

One  horse 

115 

— 

6 

V 

Expense 

Office  books 

9 

50 

7 

8 

Lincoln  &  Co. 

On  account 

500 

— 

8 

V 

Mdse.  Discount 

On  D.  E.  Kramer's  inv. 

4 

30 

10 

V 

Horse  and  Wagon 

1  delivery  wagon 

145 

— 

12 

8 

E.  Gates  &  Co. 

On  account 

250 

— 

14 
15 

1 

CD.  Simonds 
Balance 

Personal  use 
On  hand 

50 

1331 

2859 

— 

10 

4190 

10 

SET  X— SINGLE  ENTRY 

The  Object  of  this  set  is  to  give  the  student  a  knowledge  of  how 
books  are  kept  by  single  entry  and  to  show  him  the  method  of  changing 
the    books    to    double    entry. 

No  business  papers  will  be  made  out  as  the  student  has  had  suf- 
ficient  drill   in   that   kind   of   work. 

The  student  should  remember  that  in  entering  the  transactions  he 
should  take  great  care  to  show  in  the  journal  whether  the  account  is 
to  be  debited  or  credited  and  to  show  in  the  cash  book  whether  the 
account  is  to  be  posted  or  not.  No  trial  balance  can  be  taken  and 
there  is  no  good  proof  that  the  entries  have  been  posted  correctly,  so 
great  care  should  be  taken  to  post  the  entries  correctly.  It  is  advisable 
to  check  all  the  posting  before  attempting  to  find  the  net  results  of  the 
business. 


APPENDIX  xi. 

March  1.  James  Hunter  began  a  General  Produce  business  in- 
vesting cash,  $3000;  a  stock  of  goods,  $920;  and  C.  E.  Paul's  note  at 
30    days,    dated    February   25,    with   interest   at    6%,  for  $1080. 

In  single  entry,  the  interest  on  a  note  is  rarely  counted  as  a  part  of  the  investment.  You 
will  make  the  entry  without  using  the  accrued  interest. 

Make  the  entry  similar  to  the  first  entry  in  the  Model  Journal. 
Then  enter  the  cash  in  the  cash  book  in  the  usual  way.  The  entry  in 
the  cash  book  should  be  checked  in  the  folio  column. 

The  proprietor  leased  a  store  room  and  paid  $30  for  one  month's 
rent. 

Bought   office   books   to   keep   the   accounts   by   single   entry,    $9.25. 

March  2.     Paid  Henry  Stevens    $25    for  remodeling  the  store  room. 

Bought  an  office  desk  and  chair  of  Johnson  &  Co.,  for  cash,  $52.50. 

Bought  of  C.  E.  King,  Chicago,  on  the  terms,  2/10,  n/30:  500  bu. 
Potatoes  at  60^;    200  bbl.  Apples  at  $3.15. 

March  3.     Paid    City    Carting    Co.    for    drayage    on    goods,    $10.50. 

Sold  Geo.   Harding,  on  account,  30  days: 
20  bbl.  Apples  at  $3.75 

March  1+.     Bought  a  horse  of  E.  C.   Case  for  cash,  $140. 

Bought  a  delivery  wagon  and  harness  from  the  Thomas  Mfg.  Co., 
on  account,  30  days,  for  $150. 

Sold  Jas.  Wilson,  on  account,  30  days: 
25  bbl.  Apples  at  $3.95 
125  bu.  Potatoes  at  80^ 

March  5.  Bought  of  E.  C.  Hamilton  &  Co.  on  account,  30  days: 
50  bbl.   Sugar,   15750  lbs.,  at  5^. 

Sold  H.  L.   Metcalf,  City,  on  account,  30  days: 
80  bu.   Potatoes  at  78j£ 
8  bbl.  Sugar,  2480  lbs.,  at  6^ 

March  6.     Cash  sales  for  the  week,  $31.75. 

For  convenience  cash  sales  are  given  and  entered  weekly  instead  of  daily. 

March  8.     The  proprietor  withdrew  $15  for  personal  use. 
Paid  Western  Coal  Co.  $8.50  for  two  tons  of  coal. 

March  9.     Received  of  Geo.   Harding,  on  account,  $50. 
Paid  for  horse  feed,  $15.75. 

March  10.     Sold  C.   O.  Leonard,  on  account,   10  days: 
•     30  bbl.  Apples  at  $3.95 
75  bu.  Potatoes  at  79^ 

Insured  the  stock  of  goods,  the  furniture  and  fixtures,  and  the 
horse  and  wagon  for  $3000.  Paid  the  premium  for  one  year  at  the  rate 
of   80j£   for   each    $100   in   the   risk. 

H.  L.  Metcalf  returned  6  bu.  potatoes  as  unsatisfactory,  for  which 
we    gave    him    credit,    $4.68. 


xii.  METROPOLITAN  SYSTEM  OP  BOOKKEEPING 

March  11.     Sold  E.   C.   Havens,  on  account,  30  days: 
45  bbl.  Apples  at  $3.92 
125  bu.  Potatoes  at  77^ 
Sold  Wm.   Marshall  on  the  terms,  2/10,  n/30: 

12  bbl.  Sugar,  3780  lbs.,  at  6|j£ 
March  12.     Paid  C.  E.   King  for  invoice  of  March  2,  less  discount. 
Paid  personal  grocery  bill  of  the  proprietor  from  the  business  cash, 
$17.25. 

Received  Jas.   Wilson's  note  at  30  days,  on  account,  $100. 
March  13.     Sold  E.  J.   Parks  on  the  terms,  2/10,  n/30: 
35  bbl.  Apples  at  $3.95 
15  bbl.  Sugar,  4680  lbs.,  at  6}^ 
Paid  clerk's  wages  for  two  weeks,  $18. 
Cash  sales  for  the  week,  $42.80. 

March  15.     Paid  for  circular  letters  for  advertising  the  business,  $9.25. 
Paid  for  stamps,  $5. 

Bought    of    D.    C.    Pond,    Syracuse,    N.    Y.,    on    account,    30    days: 
250  bbl.  Salt  at  $1.05. 

March  16.     Received  cash  of  Jas.   Wilson,   on  account,   $150. 
Paid  cash  for  repairs  to  wagon,  $3.50. 

Paid  E.  C.  Hamilton  &  Co.  cash,  $250,  and  gave  a  note  at  30  days 
with  interest   at   6%   for   $300,   on   account. 

March  17.     Sold  John  Ford,  on  account,  30  days: 
20  bbl.  Salt  at  $2.35 
25  bbl.  Sugar,  8000  lbs.,  at  6jj£ 
Received  of  C.   O.   Leonard,  cash,  on  account,  $125. 
March  18.     Bought  of  J.  C.  Conder  &  Co.,  La  Crosse,  Wis.,  on  the 
terms,   2/10,   n/30:     600   bu.   Potatoes   at   58^. 

Paid  proprietor's  coal  bill  from  the  business  cash,  $16. 
March  19.     Sold  Geo.   Harding,  on  account,  30  days: 
20  bbl.  Apples  at  $4.05 
150  bu.  Potatoes  at  76^ 
Received   cash  of   Wm.    Marshall  for  invoice   of  the   11th,   less  2%. 
March  20.     Sold   R.    O.   Austin,   on  the  terms,   2/10,   n/30: 
30  bbl.  Salt  at  $2.20 
90  bu.  Potatoes  at  78^ 
Cash  sales  for  the  week,  $51.35. 

March  22.     Received  cash  of  E.   C.   Havens,  on  account,  $200. 
Sold  E.   C.  Havens  on  the  terms,  2/10,  n/30: 
150  bu.  Potatoes  at  78^ 
15  bbl.  Apples  at  $3.95 
Sold  Jas.  Wilson  on  the  terms,  2/10,  n/30: 
5  bbl.  Sugar,   1490  lbs.,  at  6j£ 
15  bbl.  Salt  at  $2.15 


APPENDIX  xiii. 

March  28.  Received  cash  of  E.  J.  Parks  for  invoice  of  the  13th, 
less  discount. 

Paid  D.  C.   Pond  cash,  on  account,  $250. 
Sold  John  Ford,  on  account,   10  days: 
20  bbl.  Apples  at  $3.90 
115  bu.  Potatoes  at  79^ 
March  24-     The  proprietor  withdrew  $25  for  personal  use. 
Bought  of  D.  E.  Dobbs  &  Co.,  Chicago,  on  the  terms,  2/10,  n/30: 75  bbl. 
Apples  at  $3.20. 

Paid  J.  C.   Conder  &  Co.  $200,  on  account. 
March  25.     Sold  E.  J.  Parks,  on  the  terms,  2/10,  n/30: 
25  bbl.  Apples  at  $3.95 
20  bbl.  Salt  at  $2.05 
Received  of  John  Ford,  cash,  on  account,  $250. 

Bought  of  M.  C.  Newton,  Philadelphia,  Pa.,  on  the  terms,  2/10, 
n/30:     25   bbl.    Sweet    Potatoes   at   $3.45. 

March  26.     Returned   to   D.    E.    Dobbs   &   Co.,    5   bbl.    Apples   that 
were    unsatisfactory,    and   received    credit   for    them    at    $3.20. 
Sold  C.  E.   Lathrop  on  the  terms,  2/10,  n/30: 
5  bbl.  Sweet  Potatoes  at  $4.10 
150  bu.  Potatoes  at  8l£ 
March  27.     Received  cash  of  Geo.   Harding  on  account,  $150. 
Received  cash  of  C.  E.  Paul  for  his  note  and  interest,    due   today. 
Cash  sales  for  the  week,  $51.35. 
The  proprietor  withdrew  $20  for  personal  use. 

March  29.     Received  a  30-day  note  of  John  Ford,  on  account,  $150. 
Sold  E.  J.  .Parks,  on'the  terms,  2/10,  n/30: 
15  bbl.  Apples  at  $4.05 
75  bu.  Potatoes  at  80^ 
March  80.     Received  cash  of  R.   O.   Austin  for  invoice  of  the  20th, 
less  discount. 

March  81.     Paid   clerk's  salary  for  the  balance  of  the  month,   $18. 
Cash  sales  for  the  last  three  days,   $22.40. 

CLOSING    WORK 

« 

Balance  the  cash  book. 

Post  from  all  the  books  of  entry  all  entries  that  affect  personal 
accounts,  including  the  account  of  the  proprietor. 

How  to  Find  Profit  or  Loss.  No  itemized  statement  of  profits  and 
losses  can  be  made.  The  profit  or  loss  may  be  found  in  total  by  mak- 
ing a  statement  of  Assets  and  Liabilities.  The  net  result  of  this  state- 
ment is  the  net  worth.     The  difference  between  the  net  worth  and  the 


xiv.  METROPOLITAN  SYSTEM  OP  BOOKKEEPING 

proprietor's  net  credit  is  the  profit  or  the  loss;  a  profit  if  the  net  worth 
is  the  larger;  a  loss,  if  the  net  credit  is  the  larger.  This  is  just  the  op- 
posite  of   the   method   in   double   entry. 

Statement  of  Assets  and  Liabilities.  In  making  a  statement  of 
Assets  and  Liabilities,  nothing  but  the  personal  accounts  are  found  in 
the  ledger.  Notes  Receivable  may  be  obtained  from  the  notes  on  hand, 
notes  payable  from  the  stub  of  the  note  book  or  from  the  journal 
entries,  insurance  unexpired  from  the  insurance  bill,  and  the  other  in- 
ventories in  the  usual  way.  The  form  of  the  statement  is  the  same  as 
that  for  double  entry. 

Problem.  B.  A.  Kesten  began  business  January  1  with  a  capital 
of  $3000.  March  1,  he  invested  $1000  additional.  April  15,  he  withdrew 
$250.  June  1,  he  withdrew  $300.  On  June  30,  a  statement  of  assets 
and  liabilities  showed  a  net  worth  of  $3926.50. 

The  proprietors  net  credit  is  $3450.  The  net  worth,  $3926.50, 
less  the  net  credit,  $3450,  equals  $476.50,  the  net  profit.  The  net  profit 
is  entered  in   the   books   by   a   journal  entry,   as  follows: 

B.  A.  Kesten  Cr.     $476.50 

Net    profit    for    the    six    months 
ending  June  30,   19 — 

Make  a  statement  of  assets. and  liabilities  for  this  single  entry  set. 

Use  the  following  inventories: 

Merchandise  Inventory,  $1117.75 
Expense,  unexpired  insurance,  $22.67 
Horse  and  wagon,  at  cost 
Furniture  and  Fixtures,  at  cost 

The  notes  receivable  and  notes  payable  must  be  obtained  by 
reference  to  the  journal  entries  and  the  entries  in  the  cash  book  for  the 
payment   of   notes   receivable   or   notes   payable. 

Find  the  profit  or  loss  on  the  month's  business,  and  make  an  entry 
to   give   the   proprietor   credit   for   it. 

Balance  the  proprietor's  account.  The  other  accounts  may  be 
balanced    or    not    as    the    teacher    instructs. 

How  to  Change  from  Single  to  Double  Entry.  As  a  business 
increases  in  size  and  needs  more  detailed  information  in  order  to  meet 
competition,  double  entry  books  become  necessary.  To  change  from 
single  to  double  entry,  a  statement  of  Assets  and  Liabilities  is  made,  and 
the  net  profit  or  net  loss  transferred  to  the  proprietor's  account. ,  The 
entry  to  transfer  should  debit  trie  assets  under  the  proper  headings, 
credit  the  outside  liabilities  under  the  proper  headings,  and  credit  the 
proprietor's  account  for  the  net  worth. 

If  the  same  ledger  is  to  be  used,  the  customers',  creditors',  and 
proprietor's  accounts  should  be  checked  and  the  other  accounts  should 
be  opened  up  in  the  ledger  and  posted. 


APPENDIX 


xv. 


An   entry   to    change   from   single   entry   to    double   entry   would    be 
made  as  follows,  with  the  same  ledger  used: 

Milwaukee,  Wis.,  July  1,  19 — 


The  following  entry  is 

1   made  to  change  the 

books  from  single  to  dou 

ble  entry,   per  state- 

ment  of  assets  and  liabili 

ties,  June  30,  19 — 

Horse  and  Wagon 

Per  inventory 

450 

— 

Office  Fixtures 

Per  inventory 

75 

— 

Merchandise 

Per  inventory 

1575 

50 

Notes  Receivable 

C.  Dow's  note 

325 

— 

Interest 

20  da.  on  above 

1 

08 

V 

J.  Paxton 

Owes  on  account 

317 

20 

V 

C.  Landon 

Owes  on  account 

418 

45 

V 

H.  Newton 

Owes  on  account 

115 

90 

V 

Cash 

On  hand 

1873 

90 

To  Notes  Payable 

Note  favor  N.  Ex.  Bk. 

1000 

. — 

Interest 

10  da.  on  above 

1 

67 

\l 

J.  Morton 

Business  owes  him 

880 

— 

V 

J.  Carr  &  Co. 

Business  owes  them 

437 

50 

V 

M.  Gray 

Net  worth 

2832 

86 

Make  the  entry  to  change  the  books  of  Set  X  from  single  entry  to 
double  entry. 

Post  to  the  ledger  all  the  impersonal  accounts. 

Take  a  trial  balance  of  your  ledger. 

Memorandum  Accounts.  Sometimes  firms  that  keep  their  books  by 
single  entry  keep  accounts  with  Merchandise,  Expense,  and  a  few  others 
in  order  to  have  more  detailed  information  about  the  business.  These 
accounts  are  memorandum  accounts  only.  They  should  not  be  used  in 
making  a  statement  of  assets  and  liabilities  nor  in  changing  from  single 
to  double  entry.  They  simply  give  additional  information  and  are  not 
a  part  of  the  single  entry  books  as  such.  They  show  that  single  entry 
is  inadequate  for  the  business  and  that  the  books  should  be  changed  to 
double  entry. 

Exercise  A.  Charles  Hallowell  has  been  engaged  in  business  and 
has  kept  his  books  by  single  entry.  On  December  31,  his  books  showed 
the  following  accounts:  J.  Coats,  Dr.,  $384.50;  D.  Jeston,  Dr.,  $570;  F.  I. 
Fulton,  Dr.,  $325;  M.  I.  Goss,  Cr.,  $275;  H.  A.  Baker,  Cr.,  $412;  Cash  $400.50. 
From  other  sources  he  obtained  the  following  information:  Merchandise 
inventory,  $2175:  furniture  and  fixtures,  $250;  K.  E.  Evans'  note  for 
$650,  dated  December  10,  payable  60  days  after  date,  with  interest  at 
6%.  He  owes  a  note  for  $500,  dated  November  25,  payable  90  days 
after  date,  with  interest  at  6%.  On  June  30  of  the  same  year,  his  net 
worth  was   $3275.20.     During  the  six   months   he   withdrew   $315. 


xvi.  METROPOLITAN  SYSTEM  OF  BOOKKEEPING 

a)  Make    a    statement    of    assets    and    liabilities. 

b)  Find  the  profit  or  loss   and  make  the  entry  for  it. 

c)  Make  the  entry  to  change  from  single  to  double  entry. 

Exercise  B.  James  Goldsmith  has  been  keeping  his  account  by 
single  entry.  On  January  1  his  net  worth  was  $4329.80.  During  the 
year  he  withdrew  $250.  On  December  31,  his  books  showed  the  fol- 
lowing balances:  C.  Ferris,  Dr.,  $368.50;  E.  F.  Owen,  Dr.,  $736.75; 
Merchandise,  Dr.,  $1247.25;  Expense,  Dr.,  $278.25;  C.  L.  Purin,  Cr., 
$1378.25;  Cash,  Dr.,  $1375.60;  D.  G.  Cone,  Cr.,  $489.60;  D.  E.  Willis, 
Cr.,  $273.20.  From  other  sources,  the  following  information  is  obtained: 
Merchandise  inventory,  $1736.20;  furniture  and  fixtures,  $175.50;  in- 
surance unexpired,  $37.80;  delivery  equipment,  $936.50;  S.  E.  Sanson's 
note  for  $650,   at  60  days,   dated   December  30. 

Disregard   the   discount   on   the   note  for  the  unexpired  time. 

a)  Make  a  statement  of  assets  and  liabilities. 

b)  Find  the  profit  or  loss  and  make  the  entry  for  it. 

c)  Make  the  entry  to  change  from  single  to  double  entry. 

Exercise  C.  Open  the  following  trading  accounts  in  a  manuscript 
ledger:  Purchases,  Freight  In,  Sales,  and  Merchandise  Trading. 

Enter  the  following  transactions  in  the  trading  accounts  in  the  ledger 
direct  without  first  entering  them  in  the  books  of  entry:  inventory  of  goods, 
January  1,  1916,  $6736.25;  inventory  of  goods,  June  30,  1916,  $5875.90; 
gross  purchases,  $12321.85;  gross  sales,  $15736.80;  returns  and  allowances 
to  the  business,  $217.25;  returns  and  allowances  to  customers,  $186.30; 
paid  for  freight  and  drayage,  $375.80,  of  which  $98.75  was  for  freight  and 
drayageon  goods  unsold;  paid  for  packing  boxes,  $68.25;  received  a  refund 
of  $8.25  on  a  freight  bill  paid;  paid  wages  of  shipping  clerk,  $50;  the  pro- 
prietor took  goods  from  stock  for  his  personal  use,  $47.85;  goods  were 
shipped  to  be  sold  on  commission,  $525;  goods  were  taken  from  stock  for 
use  in  the  business,  $23.80. 

a)  Close  the  trading  accounts,  June  30,  1916. 

b)  Find  the  per  cent  of  profit  or  loss  on  the  sales. 

c )  Find  the  per  cent  of  profit  or  loss  on  the  total  cost. 


INDEX 


PAGE 

Acceptance 178 

Account  Sales 191 

Account  Sales  Register 275,  276,  277 

Accounts  Classified 43 

Accounts,  Open .  . '. 37 

Accounts  Payable 160 

Accounts  Payable  Account .  .212,  216 

Accounts  Receivable 160 

Accounts  Receivable  Account 212,  216 

Accrued  Asset  Inventories 265 

Accrued  Liability  Inventories 265 

Adjustment  Entries 243 

Adjustment  of  Interest 247 

Administrative  Expense 319 

Advertising  Account 149 

Allowances 121 

Analysis  of  Jounral  Entries 24 

Analysis  of  Cash  Book  Entries 27 

Articles  of  Incorporation 295 

Assets 43 

Auxiliary  Books 140 

Bad  Debts 245 

Balance  Sheet 289 

Balancing  an  Account 56 

Bank  Account 94 

Bank  Draft/ 128 

Bankrupt  Customer 245 

Bank  Statement 101 

Bill  and  Charge  System 222 

Bill  Book .  .  140 

Bill  of  Lading,  Order 156 

Bill  of  Lading,  Straight 153 

Bills  Payable,  See  Notes  Payable 

Bills  Receivable,  See  Notes  Receivable 

Bonds 377 

Bonds,  Coupon 377 

Bonds,  Discount  on 378 

Bonds,  Premium  on 378 

Bonds,  Registered 377 

Bond  Interest 378 

Bonds  in  Treasury 378 

Bookkeeping,  Principles  of  Double  Entry ....  23 

Books  Out  of  Balance 245 

Canceling  a  Note 67 

Capital  Accounts 21 

Card  Ledger 223 

Cash  Account 56 


PAGE 
Cash  Book,  Columnar 

. .  . 136,  137, 214,  215,  274,  275,  326,  327 

Cash  Difference  Account 244 

Cash  Over 244 

Cash  Proof 105 

Cash  Sales 79 

Cash  Shortage 244 

Capital  Stock  Account 304 

Center-Column  Ledger 224 

Certificate  of  Stock 299 

Changing  from  Single  to  Double-Entry  .  . .  App.  xiv 

Charter 295 

Checking 40 

Check  Book 96 

Checks,  How  to  Write 97 

Closing  by  Journal  Entry 264 

Closing  of  Ledger 52 

Closing  Partnership  Books 253,  260 

C.  O.  D.  Account 158 

C.  O.  D.  Express 159 

C.  O.  D.  Freight 156 

Collection  and  Exchange  Account 129 

Collections 132,  133,  158,  159,162 

Columnar  Cash  Book 

136,  137,  214,  215,  274,  275,  326,  327 

Columnar  Journal 216 

Commission 193 

Commission  Accounts 270 

Commission  Books 270 

Commission  Sales  Book 272 

Common  Stock 299 

Consignee 190 

Consignment  Account 275 

Consignments 193 

Consignments,  How  to  Close 281 

Consignment  Ledger 270 

Consignment  Ledger  Proof 276 

Consignor 190 

Controlling  Accounts 211 

Copartnership,  Articles  of 143 

Corporation  Books 300 

Corporations 294 

Credit 11 

Creditors'  Accounts 18 

Cumulative  Preferred  Stock 299 

Customers'  Accounts 20 

Debit 11 


XVll. 


XV111. 


METROPOLITAN  SYSTEM  OF  BOOKKEEPING 


PAGE 

Debits  and  Credits,  General  Rule  of 23 

Delivery  Expense 165 

Depreciation 345 

Deposits,  How  Made 95 

Deposit  Tickets 95 

Directors,  Board  of 297 

Discounting  an  Interest-bearing  Note 199 

Discount,  Merchandise 91 

Discount  on  Bonds 378 

Discount  on  Others'  Notes 74 

Discount  on  Our  Notes 75 

Discount  on  Purchases 319 

Discount  on  Sales 319 

Dishonored  Draft 243 

Draft,  Bank 128 

Draft,  Sight 130 

Draft,  Time 178 

Dividend  Book 302 

Dividends 299 

Duplicate  Charge  System 220 

Entry 1 

Errors,  Correction  of 60 

Errors  in  Trial  Balance 39 

Expense  Account 13 

Expense  Bill 12 

Express  C.  O.  D 159 

Fire  Loss 247 

f.  o.b. 186 

Freight  C.  O.  D 156 

Freight  In 121 

Funds 379 

General  Expenses 319 

Goodwill .260 

Gross  Sales,  Per  Cent  of  Profit  on ,  262 

Incorporation,  Articles  of 295 

Indexing  a  Ledger 152 

Indorsements 66,  98 

Installment  Book 303 

Installment  Script  Book 303 

Insurance  Account 146 

Insurance  Policy,  Fire 145 

Interest  Account 74 

Interest,  How  Computed 72 

Interest  on  Partners'  Accounts 247 

Inventories,  Accrued  Asset 265 

Inventories,  Accrued  Liability 265 

Inventories,  How  to  Enter 264 

Inventory 44 

Invoice 12 

Invoice  Book 139 

Invoice  of  Shipment 190 

Journal 23 

Journal,  Columnar 216 

Journalizing,  Rules  for '.  .     23 

Labor 317 

Lease , 144 

Ledger,  Explanation  of 11 

Ledger,  Center  Column 224 

Ledger,  Closing  the 52 

Ledger,  Purchase r ....  211 

Ledger,  Sales 211 

Ledger,  Self-Proving 225 

Ledger,  Special  Detail  Column 224 

Letter  of  Acknowledgment 119 

Letter  of  Remittance 119 


PAGE 

Letter  Ordering  Goods 118 

Liability 43 

Loose-Leaf  Ledger 222,  223 

Loss  and  Gain  Account, 

See  Profit  and  Loss  Account 

Manufacturing  Costs 314 

Manufacturing  Cost,  Diagram  of 315 

Manufacturing  Expenses 318 

Manufacturing  Statements 352 

Materials  Requisition 316 

Materials  Stock  Record 316 

Memorandum  Accounts App.  xv 

Merchandise  Account 12,  44 

Merchandise  Discount 91 

Merchandise,  Profit  or  Loss  on    '   44 

Minute  Book 300 

Miscellaneous  Questions  and  Problems .  .  .  292,  381 

Mistakes  in  Closing 245 

Mixed  Accounts 43 

Monthly  Statement,  See  Statement  of  Account 

Net  Credit 49 

Net  Worth 49 

Nominal  Accounts 43 

Non-Cumulative  Preferred  Stock 299 

Notes,  Promissory 65 

Notes  Payable 69 

Notes  Receivable 67 

Notes  Receivable,  Stock 310 

Order  Blanks 221 

Order  Bill  of  Lading 156 

Organization  of  Corporations 295 

Opening  Corporation  Books 305 

Partners'  Accounts,  Interest  on 247 

Partners'  Capital  Accounts 150 

Partners'  Personal  Accounts 150 

Partnership  Accounts 103,  111 

Pass  Book 95 

Patent  Account 359 

Pay  Roll.... 318 

Percentage  of  Profit 174 

Per  Cent  of  Profit  on  Gross  Sales 262 

Personal  Accounts 18 

Petty  Cash  Book 328 

Posting 25 

Preferred  Stock 299 

Premium  on  Bonds 378 

Present  Worth,  See  Net  Worth 

Price  Lists,  Variable 103,  142 

Principles  of  Double  Entry  Bookkeeping. .  .  .  •.     23 
Principles    of    Double    Entry    Bookkeeping, 

Summary  of 207 

Productive  Labor 317 

Profit  and  Loss  Account 54,  355 

Profits,  Distribution  of 373 

Proof,  Consignment  Ledger 276 

Proof,  Purchase  Ledger 217 

Proof,  Sales  Ledger 216 

Proof  Trial  Balance 57 

Property  Accounts 43 

Proprietor's  Capital  Account 21 

Proprietor's  Personal  Account 150 

Purchase  Book 81,  138 

Purchase  Ledger 217 

Purchase  Ledger  Proof 216 

Purchases  Account 120 


INDEX 


xix. 


PAGE 

Purchases  Discount 213 

Raw  Material 314 

Real  Accounts 43 

Real  Estate  Account 166 

Real  Estate  Expense  and  Income  Account  .  .  .  166 

Recapitulation  Sheet,  Sales 220 

Receiving  Book 272 

Reconciling  the  Bank  Statement .  .  . 99 

Red  Ink  Items,  Transferring  of 57 

Requisition,  Materials 316 

Reserve  for  Bad  Debts 245 

Reserves 375 

Resources,  See  Assets 

Retail  Bill  and  Charge  System 222 

Returns  and  Allowances  on  Purchases 215 

Returns  and  Allowances  on  Sales 215 

Review  Questions 

. .  .64,  83, 117,  201,  255,  269,  292,  358,  372,  381 

Rules,  Summary  of 207 

Sales  Account 122 

Sales  Book 79 

Sales  Discount 213 

Sales  Ledger 211 

Sales  Ledger  Proof 217 

Sales  Journal 222 

Sales  Recapitulation  Sheet 220 

Self -Proving  Ledger 225 

Selling  Expenses 319 

Selling  Statement 352 

Shipper's  Order 158 

Shipment  Account 191 

Sight  Draft,  Three-party 130 

Sight  Draft,  Two-party 132 

Signature  Card 95 

Single  Entry App.  viii 

Sinking  Fund 379 


PAGE 

Six-Column  Statement 49 

Statement  of  Account 168 

Statement  of  Assets  and  Liabilities 51 

Statement  of  Profit  and  Loss 50 

Stock,  Common ! 299 

Stock,  Preferred 299 

Stock,  Treasury 304 

Stockholders'  Ledger 301 

Stock  Dividend 374 

Stock  Record 314 

Stocks  and  Bonds  Account 235 

Stocks    and    Bonds    Expense    and    Income 

Account 235 

Stock  Transfer  Book 301 

Subscriptions  Account 304 

Subscription  Book , 300 

Summary  of  Principles  and  Rules 207 

Surplus 373 

Terms  of  Sale 90 

Time  Card 317 

Time  Draft,  Three-party 178 

Time  Draft,  Two-party 182 

Trading  Accounts 120,  228 

Trading  and  Profit  and  Loss  Statements 171 

Transfer  of  a  Business  to  a  Corporation 306 

Treasury  Stock 304 

Trial  Balance 37 

Trial  Balance,  Errors  in 39 

Unproductive  Labor 317 

Unsubscribed  Stock 304 

Voucher 320 

Vouchers  Payable  Account 328 

Voucher  Record 325,  326,  327 

Voucher  Record  Proof -  .  .  .  328 

Voucher  Stub 323 

Voucher  System 320 


M^Sil 


UNIVERSITY  OF  CALIFORNIA   LIBRARY 
BERKELEY 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 

STAMPED  BELOW 

Books  not  returned  on  time  are  subject  to  a  fine  of 
50c  per  volume  after  the  third  dav  overdue,  increasing 
to  $1.00  per  volume  after  the  sixth  day.  Books  not  in 
demand  may  be  renewed  if  application  is  made  before 
expiration  of  loan  period. 


DE(  /       1917 
NOV   1  1918 
NOV  20  WTS 
DEC  4  W*P 

V£B  11 1**9 

4Nov'*3WR 


WmiXss&m$m& 


\\-    non^ 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


